"Bank Credit and Productivity: Evidence from Mexican Firms "

Abstract

Using a recent survey of Mexican firms, this paper provides empirical evidence for the hypothesis that bank credit improves the productivity of firms with investment opportunities. On overage, firms whit access to bank credit and investment opportunities are 50 percents more productive than other firms. Bank credit and investment opportunities are instrumented by firms¥collateral and spending on utilities to overcome potential biases of OLS estimates. The results are consistent with both OLS and IV estimates.