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The Inverted-U Relationship Between Credit Access and Productivity Growth

Philippe Aghion, Antonin Bergeaud (), Gilbert Cette (), Remy Lecat () and Hélène Maghin

Working papers from Banque de France

Abstract: In this paper, we identify two counteracting effects of credit access on productivity growth: on the one hand, better access to credit makes it easier for entrepreneurs to innovate; on the other hand, better credit access allows less efficient incumbent firms to remain longer on the market, thereby discouraging entry of new and potentially more efficient innovators. We first develop a simple model of firm dynamics and innovation-based growth with credit constraints, where the above two counteracting effects generate an inverted-U relationship between credit access and productivity growth. Then, we test our theory on a comprehensive French manufacturing firmlevel dataset. We first show evidence of an inverted-U relationship between credit constraints and productivity growth when we aggregate our data at sectoral level. We then move to firm-level analysis, and show that incumbent firms with easier access to credit experience higher productivity growth, but that they also experienced lower exit rates, particularly the least productive firms among them. To confirm our results, we exploit the 2012 Eurosystem's Additional Credit Claims (ACC) program as a quasi-experiment that generated exogenous extra supply of credits for a subset of incumbent firms.

Keywords: credit constraint; firms; growth; interest rate; productivity. (search for similar items in EconPapers)
JEL-codes: G21 G32 O40 O47 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff, nep-ent, nep-fdg, nep-sbm and nep-tid
Date: 2018
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Working Paper: The Inverted-U Relationship between Credit Access and Productivity Growth (2018) Downloads
Working Paper: The Inverted-U Relationship Between Credit Access and Productivity Growth (2018) Downloads
Working Paper: The inverted-U relationship between credit access and productivity growth (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:696

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