A Model of Structural Change under Financing Constraints
نویسندگان
چکیده
In a multi-industry growth model, firms require external funds to conduct productivityenhancing R&D, and are limited by financing constraints. The cost of research differs across industries, so financing constraints hinder productivity growth in some industries more than in others. Equilibrium industry dynamics map into a differences-indifferences regression specification where industry growth depends on the interaction between country financial development and industry R&D intensity. The paper provides a framework for interpreting several empirical results that rely on industry data, and identifies a new channel for finance to encourage growth: the faster reallocation of resources towards sectors with rapidly-expanding technological frontiers. JEL Codes: G18, O14, O16, O33, O47.
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