Abstract
In this paper, we analyse the effects of relaxing financial constraints on economic growth, total factor productivity and inequality, using a micro-founded general equilibrium model and firm-level data for South Africa. The results show that relaxing participation constraints, along with a marginal reduction in collateral requirements and monitoring costs, increases GDP by 3% points, while TFP increases by 2%. Inequality reduces by up to 3% points, driven by improvements in intermediation efficiency. There is, however, minimal participation by wealth-constrained firms either due to lack of information about available finance or preference for internally generated funds.
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 call
