Does Access to Credit Improve Productivity? Evidence from Bulgarian Firms
33 Pages Posted: 9 Jun 2008
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Does Access to Credit Improve Productivity? Evidence from Bulgarian Firms
Does Access to Credit Improve Productivity? Evidence from Bulgarian Firms
Does Access to Credit Improve Productivity? Evidence from Bulgarian Firms
Date Written: February 2008
Abstract
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.
Keywords: access to credit, productivity, transition
JEL Classification: D24, G21, G32
Suggested Citation: Suggested Citation
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