The Inverted-U Relationship between Credit Access and Productivity Growth

@inproceedings{Aghion2018TheIR,
  title={The Inverted-U Relationship between Credit Access and Productivity Growth},
  author={Philippe Aghion and Antonin Bergeaud and Gilbert Cette and R{\'e}my Lecat and H{\'e}l{\`e}ne Maghin},
  year={2018}
}
In this paper 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-base growth with credit constraints, where the above two… CONTINUE READING

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