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Financial dependence and industry growth in Europe: Better banks and higher productivity

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  • Inklaar, Robert
  • Koetter, Michael

    (Groningen University)

Abstract

Financial development stimulates growth, in particular in industries dependent on external finance. In this paper we show that more efficient banks are particularly important in stimulating both output and productivity growth, while traditional volume measures of finance are much less important for productivity growth. For this we exploit firm-level information to measure the dependence of industries on external finance and the efficiency of intermediaries. Our results are in line with Schumpeter?s (1912) contention that bankers provide resources to the most deserving entrepreneurs. Within the EU-25, growth gains are concentrated in the new member states.

Suggested Citation

  • Inklaar, Robert & Koetter, Michael, 2008. "Financial dependence and industry growth in Europe: Better banks and higher productivity," GGDC Research Memorandum GD-100, Groningen Growth and Development Centre, University of Groningen.
    • Handle: RePEc:gro:rugggd:gd-100
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    File URL: http://irs.ub.rug.nl/ppn/31733218X
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    References listed on IDEAS

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    Cited by:

    1. Bart van Ark & Mary O’Mahony & Marcel P. Timmer, 2012. "Europe’s Productivity Performance in Comparative Perspective: Trends, Causes and Recent Developments," Chapters, in: Matilde Mas & Robert Stehrer (ed.), Industrial Productivity in Europe, chapter 3, Edward Elgar Publishing.
    2. Chiara Coluzzi & Annalisa Ferrando & Carmen Martínez-Carrascal, 2009. "Financing obstacles and growth: An analysis for euro area non-financial corporations," Working Papers 0836, Banco de España.
    3. Thomas Jobert & Alexandru Monahov & Anna Tykhonenko, 2014. "Domestic Credit in Times of Supervision: An Empirical Investigation of European Countries," GREDEG Working Papers 2014-30, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    4. Edouard Challe & Jose Ignacio Lopez & Eric Mengus, 2016. "Southern Europe's institutional decline," Working Papers hal-01331723, HAL.
    5. Giulia Bettin & Alberto Zazzaro, 2012. "Remittances And Financial Development: Substitutes Or Complements In Economic Growth?," Bulletin of Economic Research, Wiley Blackwell, vol. 64(4), pages 509-536, October.
    6. ., 2013. "Europe's Productivity Performance in Comparative Perspective: Trends, Causes and Projections," Chapters, in: D. S.P. Rao & Bart van Ark (ed.), World Economic Performance, chapter 11, pages 290-316, Edward Elgar Publishing.
    7. Schmiedel, Heiko & Hasan, Iftekhar & De Renzis, Tania, 2013. "Retail payments and the real economy," Working Paper Series 1572, European Central Bank.
    8. Michalô °€ Brzozowski, 2020. "Impact of Credit Market Development and Stability on Productivity: New Evidence from the Industry Level," Annals of Economics and Finance, Society for AEF, vol. 21(1), pages 111-129, May.

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