Education and Credit

We analyze how entrepreneurs’ education affects the relationship between access to bank credit and real outcomes. For identification, we use a sharp discontinuity created by a bank’s credit score and the associated loan origination decision, along with exogenous variations in educational attainment. Our findings show that loans granted to university-educated entrepreneurs result in higher ex-post income, wealth, firm growth, and performance. Innovation, asset intangibility, and the hiring of higher-paid employees almost fully account for these gains. These mechanisms accentuate technological differences across firms, leading to higher payoffs but also higher across-firm inequality over the medium to long run.