Abstract
This paper investigates whether firms’ access to creditis characterized by state dependence.We introduce a first-order Markov model of credit restriction with sample selection that makes it possible to identify state dependence in presence of unobserved heterogeneity. The results, based on a representative sample of Italian firms, show that state dependence in access to credit is a statistically and economically significant phenomenon and that this is more prominent among medium-large firms.
