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Credit, corruption perception and development : Micro-evidence from India

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Frame of Image t access to credit and bureaucratic corruption affect the probability of innovation. Since a large number of small and medium sized entrepreneurs in India cannot access formal credit and are exposed to widespread corruption, long-run survival has varied implications for growth and welfare.
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Using the World Bank Enterprise Survey (2014), across 23 major states in India and 9000 plus observations, we explore if perceived obstacles about accessing credit and rent-seeking jointly affect the likelihood to innovate.
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We establish identification via multiple estimators – probit fixed effect estimates, instrumental variable estimators and inverse probability weight estimator. We show that, in the face of rising corruption as perceived by the firms, owners are less likely to innovate if difficulty
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in accessing finance is perceived to rise as well.
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Simultaneously, the marginal impact of perceived rise in
corruption on the probability to innovate is strictly negative as firms perceive great difficulty in accessing finance.
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Policies to promote positive sentiments should be as productive as lowering barriers towards innovation. Our results are robust to numerous alternative specifications.
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Relation between Perception of obstacles and innovation for firms, and country-wise implications for the propensity and the degree to which firms engage in innovation activities -as well as the likelihood to innovate Discussed by a host of studies, namely, Pellegrino and Savona, 2017 – Res


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Title Credit, corruption perception and development
Similar Titles
Sub Title

Micro-evidence from India

Material Type Report
Author(English)

Saibal Kar

Publisher

Centre for Studies in Social Sciences, Calcutta and IZA, Bonn

Date 2020-09
Event The frontiers in development policy conference 2020 (Online)
Subject Country India(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy
Economy < Economic Conditions
Holding Centre for Studies in Social Sciences, Calcutta and IZA, Bonn
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