Financial Development and Technology

Solomon Tadesse

No wp879, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

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 (search for similar items in EconPapers)
JEL-codes: E44 G1 G21 G32 O14 O31 O34 O4 (search for similar items in EconPapers)
Pages: pages
Date: 2007-06-01
New Economics Papers: this item is included in nep-cfn, nep-eff, nep-fdg, nep-ino and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp879.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp879.pdf [302 Found]--> https://wdi.umich.edu/files/Publications/WorkingPapers/wp879.pdf)

Related works:
Working Paper: Financial Development and Technology (2005)
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:wdi:papers:2007-879

Access Statistics for this paper

More papers in William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109. Contact information at EDIRC.
Bibliographic data for series maintained by WDI ().