Content introduction：

No.E2022001

Development strategy and the MSMEs finance gap

 

Justin Yifu Lin^a, Zirong Yang^b, Yingting Li^c, Yilin Zhang^d

 

^aInstitute of New Structural Economics, Institute of South-South Cooperation and Development, National School of Development, Peking University

^bInstitute of World Economics and Politics, Chinese Academy of Social Sciences

^c1.Peking University 2.The Research Institute of Bank of China（Corresponding author）

^dLingnan College, Sun Yat-sen University

 

Abstract：

In this paper, we investigate the root cause for large MSMEs finance gap. We advance five propositions for the mechanism through which the distorted financial structure generated by a comparative-advantage-defying (CAD) strategy leads to large MSMEs finance gap. We then use panel data from 115 countries to test the propositions and find that, the adoption of a CAD strategy accelerates the development of SOEs in capital-intensive industries, leading to concentrated banking sector and oversized SOEs obtaining high proportions of loans and enjoying low interest rate on borrowings. Finally, we use cross-sectional data in 2017 to show that the adoption of a CAD strategy is associated with large MSMEs finance gap. The paper suggests that the root cause for large MSMEs’ finance gap is the government’s inappropriate development strategy.

 

Keywords:

the MSMEs Finance Gap, Development Strategy, Financial Structure

 

JEL classification: G21, G28, O20

 

Citation：

Justin Yifu Lin, Zirong Yang, Yingting Li, Yilin Zhang, “Development strategy and the MSMEs finance gap”, Working Paper Series of New Structural Economics, E2022001, (Journal of Government and Economics, Forthcoming 2022.)

 

 本工作论文系列是新结构经济学最新的尚未在学术期刊发表的研究成果，目的在于学术讨论与评论，并不代表北京大学新结构经济学研究院的官方意见。