Philippe Aghion, Antonin Bergeaud, Gilbert Cette, Rémy Lecat, Helene Maghin, 13 September 2019

The impact of access to credit on productivity is not as straightforward as it seems.This column introduces a model that emphasises the coexistence of two opposing effects. Tighter access to credit makes it more difficult for entrepreneurs to invest and innovate, with detrimental long-run effects on productivity. But it also drives less efficient incumbent firms out of the market, easing the entry of new and potentially more efficient innovators. Combining these two opposite effects, the overall relationship between credit access and productivity takes the shape of an inverted-U.

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