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Structural change and financing constraints

  • Ilyina, Anna
  • Samaniego, Roberto

In a multi-industry growth model, firms need external funds for productivity-enhancing R&D, and face financing constraints. The cost of research differs across industries, so financing constraints hinder industry productivity growth unevenly. Equilibrium industry dynamics map into a differences-in-differences regression specification where industry growth depends on the interaction between country financial development and industry R&D intensity. The paper provides a framework for interpreting several empirical results that rely on industry growth data in terms of R&D-induced technology transfer, and identifies a new channel for finance to encourage aggregate growth: the reallocation of resources towards sectors with rapidly expanding technological frontiers.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 59 (2012)
Issue (Month): 2 ()
Pages: 166-179

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Handle: RePEc:eee:moneco:v:59:y:2012:i:2:p:166-179
DOI: 10.1016/j.jmoneco.2011.12.002
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  3. Ngai, Liwa Rachel & Pissarides, Christopher, 2004. "Structural Change in a Multi-Sector Model of Growth," CEPR Discussion Papers 4763, C.E.P.R. Discussion Papers.
  4. Roberto M. Samaniego, 2010. "Entry, Exit, and Investment-Specific Technical Change," American Economic Review, American Economic Association, vol. 100(1), pages 164-92, March.
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  6. L. Rachel Ngai & Roberto M. Samaniego, 2008. "Mapping Prices into Productivity in Multisector Growth Models," CEP Discussion Papers dp0869, Centre for Economic Performance, LSE.
  7. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers ysm123, Yale School of Management, revised 01 Mar 2001.
  8. L. Rachel Ngai & Roberto M. Samaniego, 2009. "Accounting for research and productivity growth across industries," LSE Research Online Documents on Economics 25496, London School of Economics and Political Science, LSE Library.
  9. Raymond Fisman & Inessa Love, 2004. "Financial Development and Growth in the Short and Long Run," NBER Working Papers 10236, National Bureau of Economic Research, Inc.
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  19. World Bank, 2007. "World Development Indicators 2007," World Bank Publications, The World Bank, number 8150.
  20. Carol A. Corrado & Charles R. Hulten & Daniel E. Sichel, 2006. "Intangible Capital and Economic Growth," NBER Working Papers 11948, National Bureau of Economic Research, Inc.
  21. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-30, April.
  22. Dale Jorgenson & Mun Ho & Jon Samuels & Kevin Stiroh, 2007. "Industry Origins of the American Productivity Resurgence," Economic Systems Research, Taylor & Francis Journals, vol. 19(3), pages 229-252.
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