Economy-Wide Effects of Improving Small Firms Access to Capital Markets: An Applied General Equilibrium Assessment

Omar O. Chisari; Carlos Adrián Romero; Juan Pablo Vila Martínez

doi:10.4067/S0718-88702016000100002

Authors

Omar O. Chisari Instituto de Economía UADE and CONICET
Carlos Adrián Romero Instituto de Economía UADE
Juan Pablo Vila Martínez Departamento de Economía y Finanzas UADE

DOI:

https://doi.org/10.4067/S0718-88702016000100002

Keywords:

Small and medium enterprises, CGE, access, capital markets, Argentina

Abstract

Is it possible to increase GDP, reduce unemployment and improve income distribution by providing small and medium enterprises (SMEs) better access to capital markets? In this study, we used a CGE model of Argentina to address this question and to evaluate the economy-wide net impact accounting for the reallocation of resources from other sectors. We find that although the benefits in question could be attained, SMEs should also be expected to self-exclude from programs that provide access to capital markets if that access is contingent upon higher formalization. Formalization can be expensive for SMEs. Additionally, this model estimated the gains in productivity necessary to incentivize SMEs to formalize and to voluntarily access capital markets; however, after gaining productivity, the SMEs created fewer jobs than initially expected.

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