| By: |
Solomon Tadesse;
;
|
| Abstract: |
Research in development economics reveals that the bulk of cross-country
differences in economic growth is attributable to differences in productivity.
By some accounts, productivity contributes to more than 60 percent of
countries’ growth in per capita GDP. I examine a particular channel through
which financial development could explain cross-country and crossindustry
differences in realized productivity. I argue that financial development
induces technological innovations – a major stimulus of productivity - through
facilitating capital mobilization and risk sharing. In a panel of industries
across thirty eight countries, I find that financial development explains the
cross-country differences in industry rates of technological progress, rates
of real cost reduction and rates of productivity growth. I find that the
effect of financial development on productivity and technological progress is
heterogeneous across industrial sectors that differ in their needs for
financing innovation. In particular, industries whose younger firms depend
more on external finance realize faster rate of technological change in
countries with more developed banking sector. |
| Keywords: |
Financial Development, Productivity Growth, Technological Progress, Innovation |
| JEL: |
G1 G21 G32 E44 O14 O31 O34 O4 |
| Date: |
2007–06–01 |
| URL: |
http://d.repec.org/n?u=RePEc:wdi:papers:2007-879&r=fdg |