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  5. Indirect Effects of Access to Finance

Indirect Effects of Access to Finance

  • Jing Cai
  • Adam Szeidl
American Economic Review (Forthcoming)

Abstract

We created experimental variation across markets in China in the share of firms having access to a new loan product. Access to finance had a large positive direct effect on the performance of treated firms, but a similar-sized negative indirect effect on that of firms with treated competitors, leading to non-detectable gains in producer surplus. Access to finance had a positive direct effect on business quality and consumer satisfaction, and a negative effect on price, which were not offset by indirect effects, implying net gains in consumer surplus. We document other indirect effects and combine effects in a welfare evaluation.

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