A Multi-industry Model of Growth with Financing Constraints

Author/Editor:

Anna Ilyina ; Roberto M. Samaniego

Publication Date:

May 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 09/119

Subject:

English

Publication Date:

May 1, 2009

ISBN/ISSN:

9781451872668/1018-5941

Stock No:

WPIEA2009119

Format:

Paper

Pages:

52

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