Dependence on External Finance by Manufacturing Sector: Examining the Measure and its Properties

George von Furstenberg and Ulf von Kalckreuth

Economie Internationale, 2007, issue 111, 55-80

Abstract: Rajan and Zingales (1998) use US Compustat firm decadal data for the 1980s to obtain measures for manufacturing sectors’ Dependence on External (-to-the-firm) Finance (DEF). Their way of obtaining representative values of DEF by sector and of interpreting differences in these values as fundamental, and hence applicable to other countries, have been adopted in additional studies seeking to show that sectors benefit unequally from a country’s level of financial development. Using an alternative annual data base for 21 entire US industry sectors, 1977-1997, we find that DEF figures calculated from micro data do not match cyclically-adjusted aggregate estimates. There is no support for attributing fundamental features to US. DEF values by industry that would justify applying them to other countries.

Keywords: Dependence on external finance; financial development; manufacturing industry structure; cyclical adjustment; FDI; monetary policy; specialization (search for similar items in EconPapers)
JEL-codes: E50 G20 G30 O14 O16 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (6)

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