NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Hale Utar

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June 2008Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries
with Eric Bond, James R. Tybout: w14116
Relative to their counterparts in high-income regions, entrepreneurs in developing countries face less efficient financial markets, more volatile macroeconomic conditions, and higher entry costs. This paper develops a dynamic empirical model that links these features of the business environment to cross-firm productivity distributions, entrepreneurs’ welfare, and patterns of industrial evolution. Applied to panel data on Colombian apparel producers, the model yields econometric estimates of a credit market imperfection index, the sunk costs of creating a new business, and a risk aversion index (inter alia). Model-based counterfactual experiments suggest that improved intermediation could dramatically increase the return on assets for entrepreneurial households with modest wealth, and that ...

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