Essays on Entrepreneurship and Credit in Colombia
Open Access
- Author:
- Roa Rodriguez, Monica P
- Graduate Program:
- Agricultural, Environmental and Regional Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- June 24, 2016
- Committee Members:
- Spiro Stefanou, Dissertation Advisor/Co-Advisor
Spiro Stefanou, Committee Chair/Co-Chair
Edward C Jaenicke, Committee Member
Scott J. Colby, Committee Member
James R. Tybout, Outside Member
Hoyt Bleakley, Special Member - Keywords:
- International Trade
Export Margins
Bank Financing
Credit Network
Gravity Model
Geographical Credit Market - Abstract:
- Financial development is one of the engines for economic growth. Developing economies face two challenges regarding financial development: financial inclusion and access to credit. While financial inclusion focuses on the use, access to credit focuses on the prohibitive costs or barriers to use credit, such barriers include onerous paperwork, travel distance and legal hurdles, among others. In this dissertation, we analyze the impact of use of credit on exporters and the impact of physical distance on credit flows and its impact on firms’ performance. In the first essay, we use Colombian manufacturing data on exports and external financing for the period 1998 − 2006 to estimate the credit elasticity of exports. We use bank-firm linked data to construct a supply side instrument for a manufacturer’s demand of credit, which we use to address the reverse causality between a manufacturer’s export revenue and its demand for credit. We find that access to credit produces a significant increase on a manufacturer’s export revenue explained by the positive effect of credit on an exporter’s market reach - number of destinations. Across manufacturers the effect of credit on a manufacturer’s export revenue varies by size. While medium-sized manufacturers use credit to increase their market reach, market penetration and product mix, large manufacturers only use credit to increase their market reach. When evaluating the impact of finance considering demand drivers as destination country or product characteristics, we find that external financing has greatest impact on the smallest firms. In the second essay, we use a detailed dataset of Colombian firms and bank branches to study how information and transport costs affect firms’ credit access. We also use credit flows in a cluster analysis combined with a market segmentation model to shape geographical markets, and find that high transactional and information costs tightens lending at the intensive and extensive margin in competitive markets. At firm level, we find that this relationship is stronger for smaller firms and reflects lower debt. Monitoring costs are especially high for medium-sized firms and this is reflected in a poor performance of the loan, nevertheless this effect diminishes in competitive markets. These results suggest that distance plays a stronger role for accessing to credit when soft information is more valuable. In this dissertation, we study two different aspects of financial inclusion and access to credit and find evidence of differentiated impact at firm level. We confirm external financing is important to export decision but its effect persists over time for small- and medium- sized firms. Regarding access to credit, we find geographical distance is barrier to integrate markets. The limitation extends, especially, to small firms in two senses: 1) tightening credit and 2) poor loan performance. We contribute to a nascent literature that exploits contract-level information. Future research analyzing credit registries, or changes in the coverage of existing registries, to identify the impact of information on financial inclusion, access to credit and market efficiency is needed.