Financial Market Imperfections and Productivity Growth

44 Pages Posted: 23 Apr 2004 Last revised: 21 Jul 2010

See all articles by Bruce C. N. Greenwald

Bruce C. N. Greenwald

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: April 1989

Abstract

This paper examines the impact of financial market imperfections on long-term productivity growth. It focuses on failures in markets for the sale of equity securities and hence on the failure of markets which help firms diversify the risks of real investment. The paper examines separately situations in which productivity growth is driven by learning-by-doing and where it results from the cumulative impact of explicit investments in technology by firms, In general, a multiplicity of steady-state growth paths exists with different growth rates along each path. The particular path followed by any single economy (and hence the growth rate of that economy) will depend significantly on policy interventions which mitigate effects of financial markets.

Suggested Citation

Greenwald, Bruce and Stiglitz, Joseph E., Financial Market Imperfections and Productivity Growth (April 1989). NBER Working Paper No. w2945. Available at SSRN: https://ssrn.com/abstract=227203

Bruce Greenwald (Contact Author)

Columbia Business School - Finance and Economics ( email )

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Joseph E. Stiglitz

Columbia Business School - Finance and Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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