Informal Sector and Economic Growth: The Supply of Credit Channel

Baptiste Massenot () and Stephane Straub

No 685, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: A standard view holds that removing barriers to entry and improving judicial enforcement would reduce informality and boost investment and growth. We show, however, that this conclusion may not hold in countries with a concentrated bank- ing sector or with low financial openness. When the formal sector becomes larger in those countries, more entrepreneurs become creditworthy and the higher pres- sure in the credit market increases the interest rate. This reduces future capital accumulation. We show some empirical evidence consistent with these predictions.

Date: 2011-09
New Economics Papers: this item is included in nep-ban, nep-ent, nep-iue and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://idei.fr/sites/default/files/medias/doc/wp/2011/massenot_straub.pdf Full text (application/pdf)

Related works:
Working Paper: Informal Sector and Economic Growth: The Supply of Credit Channel (2011)
Working Paper: Informal Sector and Economic Growth: The Supply of Credit Channel (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ide:wpaper:24945

Access Statistics for this paper

More papers in IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse Contact information at EDIRC.
Bibliographic data for series maintained by ().