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Does access to credit improve productivity? Evidence from Bulgarian firms

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  • Gatti, Roberta
  • Love, Inessa

Abstract

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

Suggested Citation

  • Gatti, Roberta & Love, Inessa, 2008. "Does access to credit improve productivity? Evidence from Bulgarian firms," CEPR Discussion Papers 6676, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6676
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    Cited by:

    1. Chen, Minjia & Guariglia, Alessandra, 2013. "Internal financial constraints and firm productivity in China: Do liquidity and export behavior make a difference?," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1123-1140.
    2. Anna M. Ferragina & Fernanda Mazzotta & Khalid Sekkat, 2016. "Financial constraints and productivity growth across the size spectrum: microeconomic evidence from Morocco," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 361-381, December.
    3. Sánchez-Valadez, Manuel, 2012. "Decisiones financieras, competencia en el mercado y desempeño de las empresas: Evidencia empírica para Iberoamérica/Financial Decisions, Market Competition and Firm Performance: Empirical Evidence for," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 359(36)-359, Abril.
    4. Nuri Ersahin, 2018. "Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence," Working Papers 18-20, Center for Economic Studies, U.S. Census Bureau.
    5. International Monetary Fund, 2016. "Ireland; Selected Issues," IMF Staff Country Reports 16/257, International Monetary Fund.
    6. Levine, Oliver & Warusawitharana, Missaka, 2014. "Finance and Productivity Growth: Firm-level Evidence," Finance and Economics Discussion Series 2014-17, Board of Governors of the Federal Reserve System (U.S.).
    7. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," Temi di discussione (Economic working papers) 1168, Bank of Italy, Economic Research and International Relations Area.
    8. Villalpando B. Mario, 2015. "Bank Credit and Productivity: Evidence from Mexican Firms," Working Papers 2015-06, Banco de México.
    9. Nuri Ersahin, 2017. "Creditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence," Working Papers 17-36, Center for Economic Studies, U.S. Census Bureau.
    10. Minjia Chen & Alessandra Guariglia, "undated". "Financial constraints and firm productivity in China: do liquidity and export behavior make a difference?," Discussion Papers 11/09, University of Nottingham, GEP.
    11. Castillo, Leopoldo Laborda & Guasch, Jose Luis, 2012. "Overdraft facility policy and firm performance : an empirical analysis in eastern European Union industrial firms," Policy Research Working Paper Series 6101, The World Bank.
    12. 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, KU Leuven.
    13. Giuseppe Iarossi & George R. G. Clarke, 2011. "Nigeria 2011," World Bank Other Operational Studies 27340, The World Bank.
    14. Mario Villalpando, 2014. "Bank Credit and Productivity: Evidence from Mexican Firms," Remef - The Mexican Journal of Economics and Finance, Instituto Mexicano de Ejecutivos de Finanzas. Remef, October.
    15. Godfrey Madigu, 2014. "The influence of services on firm productivity in Sub-saharan Africa," NCID Working Papers 02/2014, Navarra Center for International Development, University of Navarra.
    16. Daniel Gonçalves & Ana Martins, 2016. "The Determinants of TFP Growth in the Portuguese Manufacturing Sector," GEE Papers 0062, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Nov 2016.
    17. Vasanthakumar Bhat, 2015. "Water and Its Effect on Business Productivity: A Cross-Country Analysis," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(11), pages 4007-4020, September.
    18. Izak Atiyas, 2011. "Firm Level Data in The ERF Region: Research Questions, Data Requirements and Possibilities," Working Papers 589, Economic Research Forum, revised 06 Jan 2011.
    19. Francesco Manaresi & Nicola Pierri, 2018. "Credit supply and productivity growth," BIS Working Papers 711, Bank for International Settlements.
    20. Gatti, Roberta & Honorati, Maddalena, 2007. "Informality among Formal Firms: Firm-level, Cross-country Evidence on Tax Compliance and Access to Credit," CEPR Discussion Papers 6597, C.E.P.R. Discussion Papers.
    21. Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2010. "Are small firms more sensitive to financial variables?," Working Papers 2072/151623, Universitat Rovira i Virgili, Department of Economics.
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    24. Itzhak Goldberg & Lee Branstetter & John Gabriel Goddard & Smita Kuriakose, 2008. "Globalization and Ttechnology Absorption in Europe and Central Asia : The Role of Trade, FDI, and Cross-Border Knowledge Flows," World Bank Publications, The World Bank, number 6445, November.
    25. Ferrando, Annalisa & Ruggieri, Alessandro, 2015. "Financial constraints and productivity: evidence from euro area companies," Working Paper Series 1823, European Central Bank.

    More about this item

    Keywords

    access to credit; productivity; transition;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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