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Ethnic Ties and the Provision of Credit: Relationship-Level Evidence from African Firms

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  • Fisman Raymond J

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    (Columbia University GSB)

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    Abstract

    This paper studies the effect of ethnic ties on trade credit provision. Previous work in Africa has found that entrepreneurs of Asian and European descent are more likely to obtain credit from their suppliers. However, since these analyses use firm-level data, one cannot distinguish the effect of community ties from that of unobserved firm quality that is correlated with the owner's ethnic background. Using data on specific supplier relationships of African firms, this paper more directly examines the effect of ethnic ties on trade credit provision. Results from random and fixed-effects models indicate that firms are twice as likely to obtain credit from suppliers from within the owners' ethnic communities as from outsiders, suggestive of a very strong effect of communal ties. However, these ties accounts for only a small proportion (15 percent) of the overall preferential credit access enjoyed by entrepreneurs of non-African descent.

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    Bibliographic Info

    Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

    Volume (Year): 3 (2003)
    Issue (Month): 1 (October)
    Pages: 1-21

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    Handle: RePEc:bpj:bejeap:v:advances.3:y:2003:i:1:n:4

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    Cited by:
    1. Alberto Alesina & Eliana La Ferrara, 2004. "Ethnic Diversity and Economic Performance," NBER Working Papers 10313, National Bureau of Economic Research, Inc.
    2. Bigsten, Arne & Soderbom, Mans, 2005. "What have we learned from a decade of manufacturing enterprise surveys in Africa ?," Policy Research Working Paper Series 3798, The World Bank.
    3. Togba, Edith Leadaut, 2012. "Microfinance and households access to credit: Evidence from Côte d’Ivoire," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 473-486.
    4. Macours, Karen, 2014. "Ethnic divisions, contract choice, and search costs in the Guatemalan land rental market," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 1-18.
    5. Patrick Honohan & Thorsten Beck, 2007. "Making Finance Work for Africa," World Bank Publications, The World Bank, number 6626, January.
    6. Micheline Goedhuys & Leo Sleuwaegen, 2010. "High-growth entrepreneurial firms in Africa: a quantile regression approach," Small Business Economics, Springer, vol. 34(1), pages 31-51, January.
    7. Raymond Fisman & Mayank Raturi, 2003. "Does Competition Encourage Credit Provision? Evidence from African Trade Credit Relationships," NBER Working Papers 9659, National Bureau of Economic Research, Inc.
    8. Patrick Honohan, 2004. "Financial Sector Policy and the Poor : Selected Findings and Issues," World Bank Publications, The World Bank, number 14874, January.
    9. Henrik Hansen & John Rand, 2011. "Another Perspective on Gender Specific Access to Credit in Africa," IFRO Working Paper 2011/14, University of Copenhagen, Department of Food and Resource Economics.
    10. Marcel Fafchamps & Marco J. van der Leij, 2006. "Scientific Networks and Co-authorship," Economics Series Working Papers 256, University of Oxford, Department of Economics.
    11. Masakure, Oliver & Cranfield, John & Henson, Spencer, 2008. "The Financial Performance of Non-farm Microenterprises in Ghana," World Development, Elsevier, vol. 36(12), pages 2733-2762, December.
    12. Giulia Lamattina, 2008. "Conflict Migration and Social Networks: Empirical Evidence from Sri Lanka," Rivista di Politica Economica, SIPI Spa, vol. 98(6), pages 161-194, November-.

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