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A Multi-Industry Model of Growth with Financing Constraints

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  • Anna Ilyina
  • Roberto M. Samaniego

Abstract

This paper develops a multi-industry growth model in which firms require external funds to conduct productivity-enhancing R&D. The cost of research is industry-specific. The tightness of financing constraints depends on the level of financial development and on industry characteristics. Over time, a financially constrained economy may converge to the growth path of a frictionless economy, so long as an industry with the fastest expanding technological frontier does not permanently fall behind due to low R&D. The model’s industry dynamics map into a differences-in-differences regression, in which industry growth depends on the interaction between financial development and industry level R&D intensity.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/119.

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Length: 52
Date of creation: 01 May 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/119

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Keywords: Economic growth; Economic models; External sector; Industrial sector; Production; Productivity; r & d; r & d intensity; equation; r & d intensive industries; standard errors; survey; r & d spending; correlations; correlation; statistical significance; research spending; research activity; statistics; r & d-intensive industries; r & d investment; prediction; predictions; r & d expenditures; empirical validity; r & d expenditure; outliers; amount of r & d; research expenditures; standard deviations; counting; faces of r & d; research labs; research and development; research lab; industry r & d; total r & d spending; functional form; empirical specification; r & d investments; number of researchers; cross-country variation; absorptive capacity; r & d share; financial statistics; industry research; r & d activity; standard deviation; verifiability;

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References

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Citations

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Cited by:
  1. L. Rachel Ngai & Roberto M. Samaniego, 2009. "Accounting for research and productivity growth across industries," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 25496, London School of Economics and Political Science, LSE Library.
  2. Hanappi, Hardy, 2013. "Money, Credit, Capital and the State: On the evolution of money and institutions," MPRA Paper 47166, University Library of Munich, Germany.

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