Assistant Prof Yota Deli

UCD, School of Economics

Abstract: We examine how the credit channel affects the relation between educational attainment of firms’ owners and real outcomes. Using a sharp discontinuity, created by the bank’s credit score and the associated loan origination decision, we find that entrepreneurs who obtain university education have higher future income and wealth, while their firms enjoy higher profitability. The triggering factors of these outcomes are that high-education entrepreneurs invest in more innovative projects that require better-paid employees and are more eager to apply for credit. Overall, the initial advantage of university education is self-amplifying via the credit channel (a “Matthew Effect”).

Authored by: Yota Deli, Manthos Delis, Jose-Luis Peydro, and Adele Whelan