ERF 26th Annual Conference
Size-Dependent Industrial Policies and Firm Performance: The Case of Iran’s Credit Extension Policy for Small Firms, 2005-2013
No.
ERF26_135
Publisher
ERF
Date
September, 2020
Topic
H. Public Economics
This paper examines the direct effects of a size-dependent credit extension policy on small manufacturing firms (with 10-49 workers) in Iran. This policy was launched in November 2005 with the primary aim of quickly boosting employment opportunities. The policy was vigorously pursued in 2006 and 2007 and was phased out thereafter. We employ a large panel dataset of Iran’s manufacturing plants over the period 2003- 2013 to study the impact of this policy on the firms’ level of employment, capital stock, and total factor productivity (TFP). We take advantage of the threshold effect of the policy’s focus on firms with less than 50 workers to identify its effects on small firms, comparing firms with 45-49 workers and those with 50- 54 workers while controlling for industry, year, and a number of other effects. We find that the policy had induced increased capital formation among small firms in 2006-2008, but it had little detectable impact on employment and TFP.
Research Fellows
Hadi Salehi Esfahani
Director of CSAMES and Professor of Economics...
Authors
Amirhossein Amini Behbahani
Assistant Professor, Department of Economics, Howard University