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Misallocation, Access to Finance, and Public Credit: Firm-Level Evidence

Leon-Ledesma, Miguel A., Christopoulos, Dimitris K (2016) Misallocation, Access to Finance, and Public Credit: Firm-Level Evidence. Asian Development Review, 33 (2). pp. 119-143. ISSN 0116-1105. E-ISSN 1996-7241. (doi:10.1162/ADEV_a_00075)

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Using a database of 23,000 firms in 45 economies, we test the quantitative importance of access to finance and access to public and private credit for the determination of misallocation. We first derive measures of factor market and size distortions, and then use these measures within a regression framework to test the significance of self-declared access-to-finance obstacles as well as the effect of access to a credit line issued by either a government-owned or private bank. We find that access-to-finance obstacles and private credit increase the dispersion of distortions. Public credit has a very small effect. For firms that do not face financial obstacles, public credit increases the dispersion of distortions; for firms that face financial obstacles, it slightly decreases dispersion. Public credit does not appear to compensate for the distortions that exist in private credit markets. Quantitatively, however, financial variables explain a very small part of the dispersion of factor market and size distortions.

Item Type: Article
DOI/Identification number: 10.1162/ADEV_a_00075
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Miguel Leon-Ledesma
Date Deposited: 12 Sep 2016 19:28 UTC
Last Modified: 29 May 2019 17:49 UTC
Resource URI: (The current URI for this page, for reference purposes)
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