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Indirect Effects of Access to Finance

Author

Listed:
  • Jing Cai
  • Adam Szeidl
Abstract
We created experimental variation across local markets in China in the share of firms having access to a new loan product, to measure the direct and indirect effects of access to finance. We find that: (1) Access to finance had a large positive direct effect on the performance of treated firms. (2) Access to finance had a similar-sized negative indirect effect on the performance of firms with treated competitors. The two effects offset in the aggregate and imply no detectable gains in producer surplus. (3) Access to finance had a positive direct effect on business practices, service quality, and consumer satisfaction, and a negative effect on price. None of these effects were offset by indirect effects, suggesting net gains in consumer surplus. (4) Two additional indirect effects were active: diffusion of borrowing to firms with treated peers, and diffusion of demand to firms with treated neighbors. (5) Combining several effects in a model-based evaluation, we estimate that the loan had a private return of 74%, most of which was offset by losses to competitors, and a social return of 60%, most of which was driven by gains to consumers.

Suggested Citation

  • Jing Cai & Adam Szeidl, 2022. "Indirect Effects of Access to Finance," NBER Working Papers 29813, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29813
    Note: DEV PR
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    Cited by:

    1. Ubfal, Diego, 2024. "What Works in Supporting Women-Led Businesses?," IZA Discussion Papers 16950, Institute of Labor Economics (IZA).
    2. Barrows, Geoffrey & Calel, Raphael & Jégard, Martin & Ollivier, Hélène, 2023. "Estimating the effects of regulation when treated and control firms compete: a new method with application to the EU ETS," LSE Research Online Documents on Economics 119261, London School of Economics and Political Science, LSE Library.
    3. Lang, M & Seither, J, 2022. "The Economics of Women s Entrepreneurship: Evidence from Building Skills in Uganda," Documentos de Trabajo 20563, Universidad del Rosario.

    More about this item

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L00 - Industrial Organization - - General - - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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