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The Historical Roots of Firm Access to Finance: Evidence from the African Slave TradeLamar PierceWashington University, Saint Louis - John M. Olin School of Business Jason SnyderUniversity of California, Los Angeles (UCLA) - Anderson School of Management May 1, 2013 Abstract: This paper shows that access to finance is the crucial factor in explaining the link between the historical African slave trade and current GDP. We show: (1) The slave trade is strongly linked to current firm access to finance; (2) Among all the business obstacles a firm faces, the slave trade affects only access to finance; and (3) The slave trade erodes access to both formal credit and the trade credit thought to be its substitute. The results suggest a causal link between culture and finance that helps explain the pivotal role of both trust and finance in economic development.
Number of Pages in PDF File: 46 Keywords: Trust, Social Capital, Finance, Africa, Growth, Development working papers seriesDate posted: December 5, 2012 ; Last revised: May 5, 2013Suggested CitationContact Information
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