Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries

Eric Bond, James Tybout and Hale Utar

No 14116, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Relative to their counterparts in high-income regions, entrepreneurs in developing countries face less efficient financial markets, more volatile macroeconomic conditions, and higher entry costs. This paper develops a dynamic empirical model that links these features of the business environment to cross-firm productivity distributions, entrepreneurs' welfare, and patterns of industrial evolution. Applied to panel data on Colombian apparel producers, the model yields econometric estimates of a credit market imperfection index, the sunk costs of creating a new business, and a risk aversion index (inter alia). Model-based counterfactual experiments suggest that improved intermediation could dramatically increase the return on assets for entrepreneurial households with modest wealth, and that the gains are particularly large when the macro environment is relatively volatile.

JEL-codes: D24 L26 O16 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-dev and nep-ent
Note: PR
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Citations: View citations in EconPapers (21)

Published as Eric W. Bond & James Tybout & Hale Utar, 2015. "Credit Rationing, Risk Aversion, And Industrial Evolution In Developing Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 695-722, 08.

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Related works:
Journal Article: CREDIT RATIONING, RISK AVERSION, AND INDUSTRIAL EVOLUTION IN DEVELOPING COUNTRIES (2015)
Working Paper: Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries (2009)
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