Who Gains from Better Access to Credit? Credit Reform and Reallocation of Resources

17 Pages Posted: 25 Oct 2017

See all articles by Jens Matthias Arnold

Jens Matthias Arnold

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Lisandra Flach

Ludwig Maximilian University of Munich (LMU)

Date Written: October 16, 2017

Abstract

Brazil's 2005 bankruptcy law reform strengthened creditor protection, resulting in a substantial acceleration of credit expansion and business investment growth. In this paper, we go beyond average effects and examine to what extent the pro-creditor reform affected the allocation of resources across firms. We find evidence that the reform was particularly effective in alleviating credit constraints for high productivity firms. After the reform, better access to credit allowed these firms to thrive on the expense of others. Our results suggest that better access to credit can improve the allocation of resources across firms, thus raising aggregate productivity.

Keywords: TFP, credit constraint, credit reform, heterogeneous firms

JEL Classification: G330, O160, F120

Suggested Citation

Arnold, Jens Matthias and Flach, Lisandra, Who Gains from Better Access to Credit? Credit Reform and Reallocation of Resources (October 16, 2017). CESifo Working Paper Series No. 6677, Available at SSRN: https://ssrn.com/abstract=3058567

Jens Matthias Arnold

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Lisandra Flach (Contact Author)

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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