Liquidity Constraints and the Productivity of Small Scale Enterprises in Ecuador
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Publisher:Ohio State University. Department of Agricultural, Environmental, and Development Economics
Series/Report no.:Ohio State University. Department of Agricultural Economics and Rural Sociology. ESO (Economics and Sociology Occasional Paper). No. 2146
The purpose of this paper is to determine whether or not a causal relationship can be established between access to credit and enterprise productivity. The empirical work is based on a survey of small scale enterprises in Ecuador. The study analyzed firms in a liquidity constraint framework, and found that credit may be important in explaining enterprise productivity when it relaxes a binding liquidity constraint. However, it is not clear that liquidity is the key element affecting firm productivity. There is strong evidence indicating the importance of the sub-sector variable in explaining a firm's total productivity.
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