Abstract

http://ssrn.com/abstract=1084154
 
 

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Does Access to External Finance Improve Productivity? Evidence from a Natural Experiment


Alexander W. Butler


Rice University - Jesse H. Jones Graduate School of Business

Jess Cornaggia


Georgetown University

March 4, 2009

Journal of Financial Economics (JFE), Vol. 99, No. 1, 2011

Abstract:     
We study the relation between access to finance and productivity. Our contribution to the literature is a clean identification of a causal effect of access to finance on productivity. Specifically, we exploit an exogenous shift in demand for a product to expose how producers adapt their productivity in the presence of varying levels of access to finance. We use a triple differences testing approach and find that production increases the most over the sample period in areas with relatively strong access to finance, even in comparison to a control group. This result is statistically significant, and robust to a variety of controls, alternative variables, and tests. The causal effect of access to finance on productivity that we find speaks to the larger role of finance in economic growth.

Number of Pages in PDF File: 53

Keywords: economic growth, access to finance, banking, natural experiment, productivity, crop yields, ethanol

JEL Classification: G21, D24, Q12, Q14

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Date posted: January 17, 2008 ; Last revised: September 23, 2014

Suggested Citation

Butler, Alexander W. and Cornaggia, Jess, Does Access to External Finance Improve Productivity? Evidence from a Natural Experiment (March 4, 2009). Journal of Financial Economics (JFE), Vol. 99, No. 1, 2011. Available at SSRN: http://ssrn.com/abstract=1084154 or http://dx.doi.org/10.2139/ssrn.1084154

Contact Information

Alexander W. Butler (Contact Author)
Rice University - Jesse H. Jones Graduate School of Business ( email )
MS 531
Houston, TX 77005
United States
713-348-6341 (Phone)
HOME PAGE: http://www.owlnet.rice.edu/~awbutler/
Jess Cornaggia
Georgetown University ( email )
3700 O Street, NW
Washington, DC 20057
United States
HOME PAGE: http://www.jesscornaggia.com
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