Abstract
This paper explores whether the extent of informality in a sector affects a firm's investment decision directly or indirectly through a credit availability channel. The dataset used in the estimation of the econometric models consists of an unbalanced panel of Uruguayan firms for the period 1997-2008. The results suggest that financial restrictions affect investment decisions in Uruguay, as an increase in credit to the private sector translates into higher investment rates. A one percentage point increase in overall credit growth translates into a one half percent increase in investment rates. It is also found that, although there is no direct effect of informality on the firm investment decision, there is an indirect effect through the borrowing channel. More specifically, financial restrictions reduce the amount of investment undertaken by Uruguayan firms, the effect being smaller if the firm operates in a sector with lower informality.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
