Coase Lecture - The Inverted-U Relationship Between Credit Access and Productivity Growth

Philippe Aghion (), Antonin Bergeaud, Gilbert Cette, Rémy Lecat and Hélène Maghin
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Philippe Aghion: Harvard University, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique
Hélène Maghin: Centre de recherche de la Banque de France - Banque de France

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Abstract: 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 firm‐level dataset. We first show evidence of an inverted‐U relationship between credit constraints and productivity growth when we aggregate our data at the 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 experience lower exit rates, particularly the least productive firms among them. To support these findings, we exploit the 2012 Eurosystem's Additional Credit Claims programme as a quasi‐experiment that generated an 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)
Date: 2019-01
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff, nep-ent, nep-fdg and nep-sbm
Note: View the original document on HAL open archive server: https://hal.science/hal-01976402v1
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Citations: View citations in EconPapers (33)

Published in Economica, 2019, 86 (341), pp.1-31. ⟨10.1111/ecca.12297⟩

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Journal Article: Coase Lecture ‐ The Inverted‐U Relationship Between Credit Access and Productivity Growth (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:hal-01976402

DOI: 10.1111/ecca.12297

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