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The determinants of credit restrictions and their impact on micro firms: the case of Colombia

Author

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  • Jhon James Mora
  • Andres David Espada Castro
Abstract
Purpose - This article analyzes the determinants of credit constraints and their effects on the productivity of micro-firms in Colombia. Design/methodology/approach - An Endogenous Switching Regression Model (ESRM) is estimated to analyze credit constraint impact on economic performance. Findings - The results show that owner characteristics such as age and gender decrease the likelihood of being constrained. Firms' characteristics, such as legal status, the formality of the employees, commercial property and savings, are important for reducing credit constraints. Originality/value - This article discusses how formal credit restrictions harm the economic performance of Colombia's micro-firms. The results show that the productivity of the micro firms in Colombia could increase, on average, by U$ 825 USD when all types of restrictions are eliminated.

Suggested Citation

  • Jhon James Mora & Andres David Espada Castro, 2023. "The determinants of credit restrictions and their impact on micro firms: the case of Colombia," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(6), pages 1231-1246, December.
    • Handle: RePEc:eme:jespps:jes-08-2023-0403
    DOI: 10.1108/JES-08-2023-0403
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    More about this item

    Keywords

    Credit constraints; Formality; Small business; Productivity; Endogenous switching regression; C38; C58; D82; O12; O16;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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