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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.

Suggested Citation

  • Anna Ilyina & Roberto M. Samaniego, 2009. "A Multi-industry Model of Growth with Financing Constraints," IMF Working Papers 09/119, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/119
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    References listed on IDEAS

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    Cited by:

    1. Samaniego, Roberto M. & Sun, Juliana Y., 2015. "Technology and contractions: evidence from manufacturing," European Economic Review, Elsevier, vol. 79(C), pages 172-195.

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