Working Paper: NBER ID: w8852
Authors: Simon Johnson; John McMillan; Christopher Woodruff
Abstract: Which is the tighter constraint on private sector investment: weak property rights or limited access to external finance? From a survey of new firms in post-communist countries, we find that weak property rights discourage firms from reinvesting their profits, even when bank loans are available. Where property rights are relatively strong, firms reinvest their profits; where they are relatively weak, entrepreneurs do not want to invest from retained earnings.
Keywords: No keywords provided
JEL Codes: D23; P23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Weak property rights (P14) | Reinvestment rates (E43) |
| Secure property rights (P14) | Reinvestment rates (E43) |
| Secure property rights (P14) | Investment decisions (G11) |
| Access to bank credit (G21) | Investment decisions (G11) |
| Weak property rights (P14) | Investment levels (G31) |