TY  - JOUR
AU  - Bond,Eric
AU  - Tybout,James R.
AU  - Utar,Hâle
TI  - Credit Rationing, Risk Aversion and Industrial Evolution in Developing Countries
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14116
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14116
L1  - http://www.nber.org/papers/w14116.pdf
N1  - Author contact info:
Eric Bond
Vanderbilt University
Department of Economics
VU Station B #351819
2301 Vanderbilt Place
Nashville, TN 37235-1819
E-Mail: eric.bond@vanderbilt.edu

James R. Tybout
Department of Economics
Penn State University
517 Kern Graduate Building
University Park, PA  16802
Tel: 814/865-4259
Fax: 814/863-4775
E-Mail: jtybout@psu.edu

Hale Utar
University of Colorado
Department of Economics
256 UCB
Boulder, CO 80309-0256
Tel: 303 4927869
E-Mail: hale.utar@colorado.edu
AB  - 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 the gains are particularly large when the macro environment is relatively volatile.
ER  -