Financial Development and TFP Growth: Cross-Country and Industry-Level Evidence

Francisco Arizala, Eduardo Cavallo and Arturo Galindo

No 1654, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper estimates the impact of financial development on industry-level total factor productivity (TFP) growth using a largely unexploited panel of 77 countries with data for 26 manufacturing industries for the years 1963 to 2003. A significant relationship is found between financial development and industry-level TFP growth when controlling for country-time and industry-time fixed effects. The results are both statistically and economically significant. TFP growth can accelerate up to 0.6 percent per year, depending on the external finance requirement of industries, following a one standard deviation increase in financial development. The results are robust to different samples and specifications.

Keywords: WP-682 (search for similar items in EconPapers)
JEL-codes: D24 E44 O47 (search for similar items in EconPapers)
Date: 2009-06
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Financial development and TFP growth: cross-country and industry-level evidence (2013)
Working Paper: Financial Development and TFP Growth: Cross-Country and Industry-Level Evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:1654

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