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Dependence on External Finance by Manufacturing Sector: Examining the Measure and its Properties

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  • George M. von Furstenberg
  • Ulf von Kalckreuth

Abstract

Rajan and Zingales (1998) use US Compustat firm decadal data for the 1980s to obtain measures for manufacturing sectors’ Dependence on External (-to-the-firm) Finance (DEF). Their way of obtaining representative values of DEF by sector and of interpreting differences in these values as fundamental, and hence applicable to other countries, have been adopted in additional studies seeking to show that sectors benefit unequally from a country’s level of financial development. Using an alternative annual data base for 21 entire US industry sectors, 1977-1997, we find that DEF figures calculated from micro data do not match cyclically-adjusted aggregate estimates. There is no support for attributing fundamental features to US. DEF values by industry that would justify applying them to other countries.

Suggested Citation

  • George M. von Furstenberg & Ulf von Kalckreuth, 2007. "Dependence on External Finance by Manufacturing Sector: Examining the Measure and its Properties," Economie Internationale, CEPII research center, issue 111, pages 55-80.
  • Handle: RePEc:cii:cepiei:2007-3tc
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    References listed on IDEAS

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    More about this item

    Keywords

    Dependence on external finance; financial development; manufacturing industry structure; cyclical adjustment; FDI; monetary policy; specialization;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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