Efficient Financial Allocation and Productivity Growth in Brazil
This paper attempts to study the impact of Brazilian Development Bank credit on resource misallocation in Brazil, using manufacturing firm-level data from 2003-14. The paper first estimates measures of resource misallocation based on Hsieh and Klen...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/640271529435346695/Efficient-financial-allocation-and-productivity-growth-in-Brazil http://hdl.handle.net/10986/29932 |
| Summary: | This paper attempts to study the impact
of Brazilian Development Bank credit on resource
misallocation in Brazil, using manufacturing firm-level data
from 2003-14. The paper first estimates measures of resource
misallocation based on Hsieh and Klenow (2009), documenting
high variation in firms' capital and output
distortions. It then estimates the effect of financial
frictions and access to Brazilian Development Bank loans on
distortions and their dispersions. The analysis finds some
preliminary evidence that the use of Brazilian Development
Bank credit is not associated with a more efficient
allocation of resources. The lower cost of Brazilian
Development Bank loans reduces the marginal cost of capital,
as it induces firms to reallocate inputs from labor to
capital, and this effect is amplified for more financially
dependent firms. The findings, together with extant evidence
on the economic additionality of the Brazilian Development
Bank, suggest that there is room for improving the
allocative efficiency of the earmarked credit system in Brazil. |
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