Does access to external finance improve productivity? Evidence from a natural experiment

Alexander Butler and Jess Cornaggia

Journal of Financial Economics, 2011, vol. 99, issue 1, 184-203

Abstract: We study the relation between access to finance and productivity. Our contribution to the literature is a clean identification of a causal effect of access to finance on productivity. Specifically, we exploit an exogenous shift in demand for a product to expose how producers adapt their productivity in the presence of varying levels of access to finance. We use a triple differences testing approach and find that production increases the most over the sample period in areas with relatively strong access to finance, even in comparison with a control group. This result is statistically significant and robust to a variety of controls, alternative variables, and tests. The causal effect of access to finance on productivity that we find speaks to the larger role of finance in economic growth.

Keywords: Access; to; finance; Economic; growth (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (87)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:99:y:2011:i:1:p:184-203

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