Access to long-term credit and productivity of small and medium firms: A causal evidence

- This paper studies the effects of credit subsidies provided by the Brazilian Development Bank (BNDES) on investment and productivity of manufacturing firms.
- The identification strategy relies on an exogenous variation in access to a targeted loan program to small firms from BNDES.
- The estimated causal effects point to positive shifts in the trend for investment rates and productivity indexes; however, after considering firm and year fixed effects, it remains statistically significant only for the permanent changes on credit conditions.

This letter assesses the impact of a variation in access to a targeted loan program from Brazil's development bank on investment and productivity. Results suggest that eligible firms increased their relative investment rate and productivity, but results are robust only for permanent rather than temporary improvements in access to credit.