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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  8. Fisman, Raymond & Love, Inessa, 2004. "Financial development and growth in the short and long run," Policy Research Working Paper Series 3319, The World Bank.
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  17. Daron Acemoglu & Fabrizio Zilbotti, 1999. "Productivity Differences," NBER Working Papers 6879, National Bureau of Economic Research, Inc.
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  19. John Moore & Nobuhiro Kiyotaki, . "Credit Cycles," Discussion Papers 1995-5, Edinburgh School of Economics, University of Edinburgh.
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  21. Roberto M. Samaniego, 2008. "Entry, Exit and Investment-Specific Technical Change," PIER Working Paper Archive 08-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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