THREE ESSAYS ON FACTORS THAT BOOST DEVELOPMENT: EXTERNAL FINANCING AND DEVELOPMENT ASSISTANCE

Existing literature finds conflicting results in the relationship between economic development and external assistance (aid). This analysis researches if there is any link between these variables by assessing the impact of a major change in aid pattern given to Nigeria. The key motivation is that a significant change in the trend of development assistance in comparison to previous periods and to other countries should have visible effects on development. Using the synthetic control methodology and the estimation techniques commonly found in the literature, this paper finds that a positive relationship. The results from this research support the existing literature advocating for aid continuation. Other estimation techniques lead to inconclusive results, as they capture an average effect across countries. Synthetic control methodology provides a better illustration of the effect of assistance on economic development over time to a specific country. The link between external financing and economic development is highly debated. External financing may provide companies with the necessary financial means needed during an economic downturn. However, it may increase firms’ indebtedness and probability of failure. This is especially important in the short-run, during an economic crisis, where the effects of access to finance may be exacerbated. This research assesses this topic in two chapters.Firstly, the paper analyzes the impacts of having a bank loan by using micro data from Moldova and determining if external financing affects the survival rates of firms. The chapter finds that, on average, enterprises that report repaying external loans are less likely to exit. The result is robust, even if self-selection into loans is accounted for. Secondly, this research uses regional-level data and analyzes if regions with higher value-added of the financial sector experienced an increase in net number of job and net employment during the Great Recession. The paper finds positive impact on employment and number of firms, regardless their size. No evidence of negative effects of finance is observed.