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Finance and Demand for Skill: Evidence from Uganda

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  • Thorsten Beck
  • Mikael Homanen
  • Burak R. Uras

Abstract

We explore the empirical interaction between firm growth, financing constraints, and job creation. Using a novel small-business survey from Uganda, we find that the extent to which small businesses expand skilled employment as their sales and profits increase is significantly related to access to external funding, while the hiring of casual and family workers is not. The results are robust to the inclusion of various firm level controls, region and sector fixed effects. We support our findings by providing empirical evidence on the relationship between planned hiring and firms’ access to finance.

Suggested Citation

  • Thorsten Beck & Mikael Homanen & Burak R. Uras, 2019. "Finance and Demand for Skill: Evidence from Uganda," Journal of Development Studies, Taylor & Francis Journals, vol. 55(12), pages 2495-2512, December.
    • Handle: RePEc:taf:jdevst:v:55:y:2019:i:12:p:2495-2512
    DOI: 10.1080/00220388.2018.1539477
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    1. Popov, Alexander, 2014. "Credit constraints and investment in human capital: Training evidence from transition economies," Journal of Financial Intermediation, Elsevier, vol. 23(1), pages 76-100.
    2. Abhijit V. Banerjee & Esther Duflo, 2014. "Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 572-607.
    3. Thorsten Beck & Ross Levine & Alexey Levkov, 2010. "Big Bad Banks? The Winners and Losers from Bank Deregulation in the United States," Journal of Finance, American Finance Association, vol. 65(5), pages 1637-1667, October.
    4. Gine, Xavier & Townsend, Robert M., 2004. "Evaluation of financial liberalization: a general equilibrium model with constrained occupation choice," Journal of Development Economics, Elsevier, vol. 74(2), pages 269-307, August.
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    11. Cox, Donald & Jappelli, Tullio, 1993. "The Effect of Borrowing Constraints on Consumer Liabilities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 197-213, May.
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    17. Gabriel Chodorow-Reich, 2014. "The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008-9 Financial Crisis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 1-59.
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    Cited by:

    1. Kersten, Renate & Harms, Job & Liket, Kellie & Maas, Karen, 2017. "Small Firms, large Impact? A systematic review of the SME Finance Literature," World Development, Elsevier, vol. 97(C), pages 330-348.
    2. Thang Bach & Charles Harvie & Thanh Le, 2021. "How credit constraints affect small and medium enterprises' strategic employment decisions and employees' labour outcomes: Evidence from Vietnam1," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(2), pages 319-341, April.

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    More about this item

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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