Working Paper: CEPR ID: DP6676
Authors: Roberta Gatti; Inessa Love
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 Codes: D24; G21; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Total Factor Productivity (TFP) (D24) | Productivity (O49) |
| Access to credit (G21) | Total Factor Productivity (TFP) (D24) |
| Past growth rates (O41) | Access to credit (G21) |
| Access to credit (G21) | Productivity (via TFP) (O49) |