Development Economics Seminar

Du 04/12/2019 de 16:30 à 18:00

Salle R2.01 Campus Jourdan,48 Bd Jourdan 75014 Paris

CAI Jing (University of Maryland)

Direct and Indirect Effects of Financial Access on SMEs.

We measure the direct and indirect effects of access to finance using a randomized experiment with 3,100 firms in 78 local markets in China, which created variation in firms’ access to a new loan product both within and across markets. Our estimates imply that: (1) Financial access has large positive direct effects. Providing access to a firm increases its revenue by 9 percent, and also significantly increases profits, employment, the number of clients and the use of trade credit. The new loan does not crowd out existing loans. (2) Financial access has large negative indirect effects. Providing access to all of a firm’s competitors in the local market reduces its revenue by 7 percent, and also significantly reduces profits, employment, the number of clients and the use of trade credit. (3) In a model matched to the data in which the indirect effect reflects business stealing, treating all firms in a market would generate—despite nearly offsetting direct and indirect effects on firms—sizeable welfare gains to consumers who benefit from competition.