Access to Credit and the Size of the Formal Sector in Brazil

Arbeitspapier

This paper studies the link between credit conditions and formalization in Brazil, as both credit and the rate of formalization have notably increased in the last decade. A firm dynamics model with endogenous formal and informal sectors is developed to quantitatively evaluate how much of the change in corporate credit and the size of the formal sector can be attributed to a reduction in the cost of financial intermediation. The model predicts that the observed reduction in intermediation costs generates an increase in the credit-to-output ratio and in the share of formal workers, in line with the data. It is found that -by affecting the corporate interest rate, the allocation of capital and the entry and exit rates- the change in credit conditions has important effects on firm size distribution and aggregate productivity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IDB Working Paper Series ; No. IDB-WP-404

Classification and Topics

• Classification: Wirtschaft ; Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity ; Informal Economy; Underground Economy ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): D'Erasmo, Pablo
• Event: Veröffentlichung
• (who): Inter-American Development Bank (IDB)
• (where): Washington, DC
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/89072
• Last update: 10.03.2025, 11:45 AM CET