{
  "title": "Finance and Employment in Developing Countries: The Working Capital Channel",
  "publication": "IMF Working Papers, August 15, 2017",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2017/08/15/finance-and-employment-in-developing-countries-the-working-capital-channel-45068",
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  "summary": "We study the effect of external financing constraint on job creation in emerging markets and developing countries (EMDC) at the firm level by looking at a specific transmission channel - the working capital channel.",
  "sections": [
    {
      "heading": "Main objective and approach",
      "content": "- Study the effect of external financing constraint on job creation in emerging markets and developing countries (EMDC) at the firm level by examining the working capital channel.\n- Develop a simple model to illustrate how the need for working capital financing affects the link between financial constraint and a firm's job creation.\n- Empirically test the model's main predictions using the World Bank Enterprise Surveys data."
    },
    {
      "heading": "Key analytical findings (model)",
      "content": "- The effect of relaxing financial constraint on job creation is greater:\n  - the smaller the firm scale, and\n  - the more labor-intensive the firm's production structure.\n- The model focuses on the working capital financing requirement as the specific transmission channel linking external finance and firm employment."
    },
    {
      "heading": "Empirical findings (World Bank Enterprise Surveys)",
      "content": "- The authors find strong evidence for the working capital channel of external finance on firm employment.\n- The empirical analysis is presented as tests of the model's main predictions using firm-level survey data."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Economic theory, Employment, Financial frictions, Job creation, Labor, Labor share\n- Keywords: Central and Eastern Europe, Employment, employment growth, Financial constraint, Financial frictions, firm-level employment, fixed capital, job creation, Labor share, optimization problem, panel data, right-hand-side variable, small firm, survey database, working capital financing, WP\n\n---\n\n Content in this bundle\n\n- Finance and Employment in Developing Countries: The Working Capital Channel, WP/17/189, August 2017\n  - Finance and Employment in Developing Countries: The Working Capital Channel, WP/17/189, August 2017 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Finance and Employment in Developing Countries: The Working Capital Channel, WP/17/189, August 2017 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2017/08/15/finance-and-employment-in-developing-countries-the-working-capital-channel-45068"
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    "Authors: Mai Dao, Lucy Qian Liu",
    "Published: August 15, 2017",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484314197.001",
    "Study the effect of external financing constraint on job creation in emerging markets and developing countries (EMDC) at the firm level by examining the working capital channel.",
    "Develop a simple model to illustrate how the need for working capital financing affects the link between financial constraint and a firm's job creation.",
    "Empirically test the model's main predictions using the World Bank Enterprise Surveys data.",
    "The effect of relaxing financial constraint on job creation is greater:",
    "The model focuses on the working capital financing requirement as the specific transmission channel linking external finance and firm employment.",
    "The authors find strong evidence for the working capital channel of external finance on firm employment.",
    "The empirical analysis is presented as tests of the model's main predictions using firm-level survey data.",
    "Subject: Economic theory, Employment, Financial frictions, Job creation, Labor, Labor share",
    "Keywords: Central and Eastern Europe, Employment, employment growth, Financial constraint, Financial frictions, firm-level employment, fixed capital, job creation, Labor share, optimization problem, panel data, right-hand-side variable, small firm, survey database, working capital financing, WP",
    "**Finance and Employment in Developing Countries: The Working Capital Channel, WP/17/189, August 2017**"
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