A Multi-Industry Model of Growth with Financing Constraints

53 Pages Posted: 8 Jun 2009

See all articles by A. Ilyina

A. Ilyina

International Monetary Fund (IMF)

Roberto M. Samaniego

George Washington University - Department of Economics

Date Written: June 2009

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: Economic growth, Economic models, External financing, External sector, Industrial sector, Production, Productivity

Suggested Citation

Ilyina, A. and Samaniego, Roberto M., A Multi-Industry Model of Growth with Financing Constraints (June 2009). Available at SSRN: https://ssrn.com/abstract=1415176 or http://dx.doi.org/10.2139/ssrn.1415176

A. Ilyina

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Roberto M. Samaniego (Contact Author)

George Washington University - Department of Economics ( email )

2115 G St NW Suite 340
Washington, DC 20052
United States

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