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Financial development and TFP growth: cross-country and industry-level evidence

This article estimates the impact of financial development on industry-level Total Factor Productivity (TFP) growth using a largely unexploited panel of 77 countries with data for 26 manufacturing industries for the years 1965 to 2003. A significant relationship is found between financial development and industry-level TFP growth when controlling for country-time and industry-time fixed effects. The results are both statistically and economically significant. TFP growth can accelerate up to 0.6% per year, depending on the external finance requirement of industries, following a one SD increase in financial development. The results are robust to different samples and specifications.

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File URL: http://hdl.handle.net/10.1080/09603107.2012.725931
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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 23 (2013)
Issue (Month): 6 (March)
Pages: 433-448

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Handle: RePEc:taf:apfiec:v:23:y:2013:i:6:p:433-448
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