We are grateful to the editor, two anonymous referees, and Ana Fostel, Marco Cipriani, Stijn Claessens, Graciela Kaminsky, Nobuhiro Kiyotaki, Stephanie Marie Stolz, Mark Swinburne, and participants at various seminars for helpful comments and suggestions. We would like to thank Gianluca Violante for providing us with quality-adjusted capital good price series, and also Sungil Kwak and Virginia Robano for excellent research assistance. All errors are the authors’.
Technology and Financial Development
Article first published online: 20 JUL 2011
© 2011 The Ohio State University
Journal of Money, Credit and Banking
Volume 43, Issue 5, pages 899–921, August 2011
How to Cite
ILYINA, A. and SAMANIEGO, R. (2011), Technology and Financial Development. Journal of Money, Credit and Banking, 43: 899–921. doi: 10.1111/j.1538-4616.2011.00401.x
- Issue published online: 20 JUL 2011
- Article first published online: 20 JUL 2011
- Received August 10, 2009; and accepted in revised form January 21, 2011.
- financial development;
- external finance dependence;
- industry growth;
- R&D intensity;
- investment lumpiness;
- intellectual property rights
The growth benefits from financial development are known to vary across industries. However, no systematic effort has been made to determine the technological characteristics shared by industries that grow relatively faster in more financially developed economies. Using the standard growth-theoretic definition of technology in terms of the production function, we explore a range of technological characteristics that theory suggests might underpin differences across industries in the need or the ability to raise external finance. We find that industries that grow faster in more financially developed countries display greater R&D intensity and investment lumpiness, indicating that well-functioning financial markets direct resources toward industries where growth is driven by R&D.