Credit within the firm
Review of Economic Studies, ISSN: 0034-6527, Vol: 80, Issue: 1, Page: 211-247
2013
- 43Citations
- 82Captures
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Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
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Article Description
We use variation in the degree of development of local credit markets and matched employer- employee data to assess the role of the firm as an internal credit market. We find that firms operating in less financially developed markets offer lower entry wages but faster wage growth than firms in more financially developed markets. This helps firms finance their operations by implicitly raising funds from workers. We control for local market fixed effects and only exploit time variation in the degree of local financial development induced by an exogenous liberalization, so that the effect we find is unlikely to reflect unobserved local factors that systematically affect wage-tenure profiles. We estimate that the amount of credit generated by implicit lending within the firm is economically important and can be as large as 30 percent of the bank lending. Consistent with credit market imperfections opening up trade opportunities within the firm, we find that the internal rate of return of implicit loans lies between the rate at which workers savings are remunerated in the market and the rate that firms pay on their loans from banks. © The Author 2012. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.
Bibliographic Details
http://www.scopus.com/inward/record.url?partnerID=HzOxMe3b&scp=84873583320&origin=inward; http://dx.doi.org/10.1093/restud/rds024; https://academic.oup.com/restud/article-lookup/doi/10.1093/restud/rds024; http://academic.oup.com/restud/article-pdf/80/1/211/18386134/rds024.pdf; https://dx.doi.org/10.1093/restud/rds024; https://academic.oup.com/restud/article-abstract/80/1/211/1599326?redirectedFrom=fulltext
Oxford University Press (OUP)
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