Finance and productivity: A literature review

Mark Heil
Additional contact information
Mark Heil: U.S. Department of the Treasury

No 1374, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper surveys a broad range of studies and highlights the main findings of the empirical literature regarding business finance and productivity. Numerous studies analyse the productivity effects of financial development and frictions. The results suggest: 1) Financial development likely has favourable effects on productivity growth; 2) financial frictions that impede the efficient flow of finance can mitigate the positive effects through a variety of channels; and 3) the magnitudes of productivity costs of financial frictions generally appear modest in financially developed economies but are considerably larger in developing economies. The paper also reviews studies of the influence of specific mechanisms on productivity, such as human capital, corporate finance, financial sector efficiency, equity finance and venture capital. Some policies that hamper productivity growth include inefficient insolvency regimes that impede exit of low-productivity firms, poorly developed contract monitoring and enforcement systems between banks and firms, collateral constraints that impair resource reallocation and imperfect bank supervisory practices that diminish productive capital reallocation through distorted lending practices.

Keywords: business cycle; finance; financial development; financial friction; human capital; insolvency regime; productivity; venture capital (search for similar items in EconPapers)
JEL-codes: D2 G2 G3 J2 O4 (search for similar items in EconPapers)
Date: 2017-03-02
New Economics Papers: this item is included in nep-eff
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://doi.org/10.1787/41194fea-en (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1374-en

Access Statistics for this paper

More papers in OECD Economics Department Working Papers from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().