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Does access to credit improve productivity? Evidence from Bulgarian firms

Listed author(s):
  • Gatti, Roberta
  • Love, Inessa

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6676.

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Date of creation: Feb 2008
Handle: RePEc:cpr:ceprdp:6676
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