Does access to external finance improve productivity? Evidence from a natural experiment

Alexander W. Butler, Jess Cornaggia

Research output: Contribution to journalArticle

49 Scopus citations


We study the relation between access to finance and productivity. Our contribution to the literature is a clean identification of a causal effect of access to finance on productivity. Specifically, we exploit an exogenous shift in demand for a product to expose how producers adapt their productivity in the presence of varying levels of access to finance. We use a triple differences testing approach and find that production increases the most over the sample period in areas with relatively strong access to finance, even in comparison with a control group. This result is statistically significant and robust to a variety of controls, alternative variables, and tests. The causal effect of access to finance on productivity that we find speaks to the larger role of finance in economic growth.

Original languageEnglish (US)
Pages (from-to)184-203
Number of pages20
JournalJournal of Financial Economics
Issue number1
StatePublished - Jan 1 2011


All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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