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Investment in Segmented Capital Markets

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  • Ijaz Nabi

Abstract

This paper analyzes differences in the investment behavior of firms with unequal access to the capital market. Using empirical evidence from Pakistan, characteristics of formal and informal capital markets are described. Probabilities are estimated for firms being selected in the formal capital market where credit is cheap. Investment behavior is then analyzed using a switching regressions model. It is concluded that "favored" firms use more capital-intensive technologies and realize their investment plans more quickly than "excluded" firms do. Investment determinants related to entrepreneurial features are also identified.

Suggested Citation

  • Ijaz Nabi, 1989. "Investment in Segmented Capital Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 453-462.
  • Handle: RePEc:oup:qjecon:v:104:y:1989:i:3:p:453-462.
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    File URL: http://hdl.handle.net/10.2307/2937805
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    Cited by:

    1. Thierry Tressel, 1999. "Financial Intermediation and Growth: Long Run Consequences of Capital Market Imperfections," CSEF Working Papers 20, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. Heikki Heino, 2006. "Use of borrowed start-up capital and micro enterprises in Mexico: existence of liquidity constraints," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 5(1), pages 1-30, May.
    3. Tressel, Thierry, 2003. "Dual Financial Systems and Inequalities in Economic Development," Journal of Economic Growth, Springer, vol. 8(2), pages 223-257, June.
    4. Rajesh Raj, Seethamma Natarajan, 2007. "Technical Efficiency in the Informal Manufacturing Enterprises: Firm level evidence from an Indian state," MPRA Paper 7816, University Library of Munich, Germany.
    5. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Måns S–derbom & Francis Teal & Albert Zeufack, 2003. "Credit Constraints in Manufacturing Enterprises in Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(1), pages 104-125, March.

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