Finance, Firm Size, and Growth

Thorsten Beck (), Asli Demirguc-Kunt, Luc Laeven () and Ross Levine ()

No 10983, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines whether financial development boosts the growth of small firms more than large firms and hence provides information on the mechanisms through which financial development fosters aggregate economic growth. We define an industry's technological firm size as the firm size implied by industry specific production technologies, including capital intensities and scale economies. Using cross-industry, cross-country data, the results indicate that financial development exerts a disproportionately large effect on the growth of industries that are technologically more dependent on small firms. This suggests that financial development accelerates economic growth by removing growth constraints on small firms and also implies that financial development has sectoral as well as aggregate growth ramifications.

JEL-codes: G2 L11 L25 O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dev, nep-ent, nep-fin and nep-mfd
Date: 2004-12
Note: IFM
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Related works:
Working Paper: Finance, firm size, and growth (2005)
Journal Article: Finance, Firm Size, and Growth (2008)
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