We examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth. We first develop a simple growth model where firms engage in two types of investment: a short-term one and a long-term productivity-enhancing one. Because it...

Can microcredit help unlock a poverty trap for some people by putting their businesses on a different trajectory? Could the small microcredit treatment effects often found for the average household mask important heterogeneity? In Hyderabad, India, we find that “gung ho entrepreneurs” (GEs),...