Credit, Labor Informality and Firm Performance in Colombia

Lorena Caro, Arturo Galindo and Marcela Meléndez Arjona

No 3974, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper explores the links between labor formality, access to credit and firm performance in Colombia using Annual Manufacturing Survey data for the period 2000-2009. A significant though small relationship is found between access to credit and informality. The results suggest that a 10 percent increase in the ratio of credit to sectoral output increases labor formality between 0. 76 and 1. 14 percentage points. This effect vanishes as a firm's financial constraint increases. The paper also reports a strong correlation between labor formality and firm performance measured as output and employment growth. A one percentage point increase in labor formality is associated with an 8. 5 percent increase in output and an 11 percent increase in employment growth.

Keywords: Credit markets; Financial constraints; Informality (search for similar items in EconPapers)
JEL-codes: E26 G21 O16 O4 (search for similar items in EconPapers)
Date: 2012-06
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Credit, Labor Informality and Firm Performance in Colombia (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:3974

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