Financing Spreads and Development
We study how dispersion in financing cost and financial contract enforcement affect entrepreneurship, firm dynamics and productivity. We use employee-employer administrative linked data combined with data on financial transactions of all formal firms in Brazil to show how interest rate spreads vary with firm size, age, among other characteristics. We present a general equilibrium model with endogenous occupational choice based on a modified version of Buera, Kaboski, and Shin (2011), which are consistent with those facts of the the credit market. We then provide evidence on the allocative effects of financial reforms. Eliminating dispersion in financing cost leads to more credit and higher output due to cheaper credit for productive agents with low assets. In addition, abstracting from heterogeneity in interest rate spreads understates the impacts of financial reforms that improve the enforcement of credit contracts.
Date: 20 January 2020, 13:00 (Monday, 1st week, Hilary 2020)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room C
Speaker: César Santos (Bank of Portugal and FGV EPGE)
Organising department: Department of Economics
Part of: Department of Economics Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark