Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110414
Authors: 
Massenot, Baptiste
Straub, Stéphane
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper Series 106
Abstract: 
The standard view suggests that removing barriers to entry and improving judicial enforcement reduces informality and boosts investment and growth. However, a general equilibrium approach shows that this conclusion may hold to a lesser extent in countries with a constrained supply of funds because of, for example, a more concentrated banking sector or lower financial openness. When the formal sector grows larger in those countries, more entrepreneurs become creditworthy, but the higher pressure on the credit market limits further capital accumulation. We show empirical evidence consistent with these predictions.
Document Type: 
Working Paper

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