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Microfinance beyond self-employment: Evidence for firms in Bulgaria

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  • Erhardt, Eva Christine

Abstract

This paper provides new evidence on the impact of microfinance on job creation beyond self-employment. We examine wage-employment effects for a typical program in Eastern Europe with average loan sizes that are considerably above what has been studied so far. We apply propensity score matching extended by a difference-in-differences estimator to panel data from an individual-lending program to firms in Bulgaria. Our results indicate that microcredit has very positive effects on job creation. Participating firms have on average 2.5 (or 33 percent) more employees two years after receiving a microcredit than matched non-participants. This strong effect seems to be related to a certain loan size threshold necessary for positive impacts to unfold. Effects are largest for the smallest firms, supporting findings from other studies that small firms are more constrained by credit than large firms. Investigating dynamic effects for up to six years after treatment, we furthermore show that effects are long lasting.

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  • Erhardt, Eva Christine, 2017. "Microfinance beyond self-employment: Evidence for firms in Bulgaria," Labour Economics, Elsevier, vol. 47(C), pages 75-95.
    • Handle: RePEc:eee:labeco:v:47:y:2017:i:c:p:75-95
    DOI: 10.1016/j.labeco.2017.04.009
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    More about this item

    Keywords

    Microfinance; Wage employment; Micro; small and medium enterprises; Impact evaluation; Bulgaria;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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