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Four essays on financial systems and economic performance

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thesis
posted on 2023-06-08, 14:08 authored by Gemechu Ayana Aga
This thesis analyses the causes and consequences of access to credit by small- scale enterprises in developing countries and the design of optimal financial systems. The first essay explores the link between informality and access to external finance by Small and Microenterprises (MSEs). A probit model is estimated using data on MSEs from Ethiopia. The results show that informality plays an important role in a firm's access to credit. Specifically, informal firms are about sixteen percentage points more likely to be credit constrained than their formal counterparts. The second essay examines the consequence of credit constraints on a firm's innovation using the same data on MSEs from Ethiopia. We construct a measure of innovation exploiting a question in the survey that asks whether a firm has engaged in some form of innovation or not. Employing various estimation methods to deal with the possible endogeneity of access to credit, the results show that access to credit has a significant and positive effect on a firm's propensity to engage in innovative activi- ties. The third essay examines whether opening a stock exchange boosts per capita income growth in Sub-saharan Africa countries (SSA). Employing a semi-parametric Difference-in-Difference (DiD), i.e., a DiD on a set of matched countries, we show that opening a stock exchange does not appear to have a significant impact on eco- nomic growth in SSA as well as in other developing countries in other regions. The fourth essay studies whether the structure of the economy determines the evolution of the optimal structure of the financial system. Employing a measure of economic structure constructed based on a country's comparative advantage and using an in- novative instrumentation strategy to deal with the possible endogeneity of economic structure, the essay shows that the structure of the economy exerts a first-order causal effect on the evolution of the structure of a country's financial system

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  • Published version

Pages

209.0

Department affiliated with

  • Economics Theses

Qualification level

  • doctoral

Qualification name

  • phd

Language

  • eng

Institution

University of Sussex

Full text available

  • Yes

Legacy Posted Date

2013-01-22

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