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The big-city bias in access to finance: evidence from firm perceptions in almost 100 countries

Neil Lee and Davide Luca

Journal of Economic Geography, 2019, vol. 19, issue 1, 199-224

Abstract: There is mounting evidence in the developed world to suggest that there is geographical variation in access to finance. At the same time, there is a growing interest in the advantages of major cities in emerging economies in providing better access to services. Yet there is little evidence on spatial variation in access to finance in the developing world. In this article, we address this gap. We propose that one important function of big cities is to provide better credit markets, but that—as countries develop—this ‘big city bias’ is likely to decline. We test these hypotheses using data on over 80,000 firms in 97 countries and provide new evidence that firms in large cities—with more than 1 million inhabitants—are less likely to perceive access to capital as a constraint. However, this big-city bias in access to finance declines as countries develop.

Keywords: Access to finance; urbanisation; credit markets; cities; firm financing (search for similar items in EconPapers)
JEL-codes: G10 O16 R51 (search for similar items in EconPapers)
Date: 2019
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