Resource information
Growing research and policy interest
focuses on the misallocation of output and factors of
production in developing economies. This paper considers the
possible misallocation of financial loans. Using plant-level
data on the organized and unorganized sectors, the paper
describes the temporal, geographic, and industry
distributions of financial loans. The focus of the analysis
is the hypothesis that land misallocation might be an
important determinant of financial misallocation (for
example, because of the role of land as collateral against
loans). Using district-industry variations, the analysis
finds evidence to support this hypothesis, although it does
not find a total reduction in the intensity of financial
loans or those being given to new entrants. The analysis
also considers differences by gender of business owners and
workers in firms. Although potential early gaps for
businesses with substantial female employment have
disappeared in the organized sector, a sizeable and
persistent gap remains in the unorganized sector.
