A Multi-industry Model of Growth with Financing Constraints

Anna Ilyina and Roberto Samaniego ()

No 2009/119, IMF Working Papers from International Monetary Fund

Abstract: This paper develops a multi-industry growth model in which firms require external funds to conduct productivity-enhancing R&D. The cost of research is industry-specific. The tightness of financing constraints depends on the level of financial development and on industry characteristics. Over time, a financially constrained economy may converge to the growth path of a frictionless economy, so long as an industry with the fastest expanding technological frontier does not permanently fall behind due to low R&D. The model’s industry dynamics map into a differences-in-differences regression, in which industry growth depends on the interaction between financial development and industry level R&D intensity.

Keywords: WP; growth rate (search for similar items in EconPapers)
Pages: 52
Date: 2009-05-01
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Citations: View citations in EconPapers (3)

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Working Paper: A Multi-industry Model of Growth with Financing Constraints (2009)
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