Finance and Development: A Tale of Two Sectors

Francisco Buera, Joseph Kaboski and Yongseok Shin

American Economic Review, 2011, vol. 101, issue 5, 1964-2002

Abstract: We develop a quantitative framework to explain the relationship between aggregate/sector-level total factor productivity (TFP) and financial development across countries. Financial frictions distort the allocation of capital and entrepreneurial talent across production units, adversely affecting measured productivity. In our model, sectors with larger scales of operation (e.g., manufacturing) have more financing needs, and are hence disproportionately vulnerable to financial frictions. Our quantitative analysis shows that financial frictions account for a substantial part of the observed cross-country differences in output per worker, aggregate TFP, sector-level relative productivity, and capital-to-output ratios. (JEL E23, E44, O41, O47)

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (617)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.5.1964 (application/pdf)
http://www.aeaweb.org/aer/data/aug2011/20090418_data.zip dataset accompanying article (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Finance and Development: A Tale of Two Sectors (2009)
Working Paper: Finance and Development: A Tale of Two Sectors (2008)
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:aea:aecrev:v:101:y:2011:i:5:p:1964-2002

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().