Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries / Eric Bond, James R. Tybout, Hâle Utar.

Format:

Book

Author/Creator:

Bond, Eric.

Contributor:

National Bureau of Economic Research.

Tybout, James R.

Utar, Hâle.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14116.

NBER working paper series no. w14116

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

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.

Notes:

Print version record

June 2008.