Informality and Bank Credit: Evidence from Firm-Level Data
IMF Working Papers, April 1, 2008
Source details
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- Informality and Bank Credit: Evidence from Firm-Level Data
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Bibliographic details
- Authors: Junko Koeda, Era Dabla-Norris
- Published: April 1, 2008
- Series: IMF Working Papers
Summary findings
- The paper relies on a firm-level data on transition economies to examine the relationship between informality and bank credit.
- Informality is robustly and significantly associated with lower access to and use of bank credit.
- Higher tax compliance costs reduce firms' reliance on bank credit.
- A stronger quality of the legal environment is associated with higher access to credit even for financially opaque informal firms.
- An interactive term between a country-wide measure of tax compliance costs and the level of informal activity is negative and significant, suggesting that the negative association between informality and bank credit is stronger in countries with weak tax administration.
Analytical focus
- Empirical relationship between informal firm status and access to bank credit using firm-level data from transition economies.
- Role of tax compliance costs as a country-wide factor influencing firms’ reliance on bank credit.
- Role of legal environment quality in moderating access to credit for financially opaque informal firms.
- Interaction effects indicating heterogeneity across countries by tax administration strength.
Content in this bundle
- _wp0894 - References