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Does access to credit improve productivity ? Evidence from Bulgarian firms

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Author Info
Gatti, Roberta
Love, Inessa

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Abstract

Although it is widely accepted that financial development is associated with higher growth, the evidence on the channels through which credit affects growth on the micro-level is scant. Using data from a cross section of Bulgarian firms, the authors estimate the impact of access to credit (as proxied by indicators of whether firms have access to a credit or overdraft facility) on productivity. To overcome potential omitted variable bias of OLS estimates, they use information on firms'past growth to instrument for access to credit. The authors find credit to be positively and strongly associated with total factor productivity. These results are robust to a wide range of robustness checks.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3921.

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Date of creation: 01 May 2006
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Handle: RePEc:wbk:wbrwps:3921

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Keywords: Banks&Banking Reform; Economic Theory&Research; Investment and Investment Climate; Economic Growth; Financial Intermediation;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Correa, Paulo G. & Fernandes, Ana M. & Uregian, Chris J., 2008. "Technology adoption and the investment climate : firm-level evidence for Eastern Europe and Central Asia," Policy Research Working Paper Series 4707, The World Bank. [Downloadable!]
  2. Marialuz Moreno Badia & Veerle Slootmaekers, 2008. "The Missing Link Between Financial Constraints and Productivity," LICOS Discussion Papers 20808, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
    Other versions:
  3. Gatti, Roberta & Honorati, Maddalena, 2008. "Informality among formal firms : firm-level, cross-country evidence on tax compliance and access to credit," Policy Research Working Paper Series 4476, The World Bank. [Downloadable!]
    Other versions:
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