Investment and Credit Constraints in Transition Economies: Micro Evidence from Poland, the Czech Republic, Bulgaria and Romania
Catholic University of Leuven (KUL) - LICOS - Centrum voor Transitie-economie; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
Middlesex University Business School
Université Catholique de Louvain, IRES, CORE, LICOS-KUL and CEPR; Catholic University of Leuven (KUL), LICOS & CEPR
Economic Letters, Vol. 78, No. 2, pp. 253-258, February 2003
In this paper we investigate to what extent firm investment in transition countries is sensitive to internal finance. We use accounts data of over 4000 companies in four countries at different stages of transition. We find that firms in Bulgaria and Romania are less sensitive to internal financing constraints, in contrast to firms in Poland and the Czech Republic. A likely explanation is that Bulgaria and Romania, which are the least advanced in the reforms towards market economy, have a stronger persistence of soft budget constraints than in the other two more advanced countries.
Keywords: Investment, financial constraints, soft budget constraint, transition to a market
JEL Classification: E22, G32, P21, D21, D92Accepted Paper Series
Date posted: April 15, 2003
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