Author : Raymond Fisman
Publisher : World Bank Publications
ISBN 13 :
Total Pages : 52 pages
Book Rating : 4./5 ( download)
Book Synopsis Patterns of Industrial Development Revisited by : Raymond Fisman
Download or read book Patterns of Industrial Development Revisited written by Raymond Fisman and published by World Bank Publications. This book was released on 2002 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors reexamine the role of financial market development in the intersectoral allocation of resources. First, they characterize the assumptions underlying previous work in this area, in particular, that of Rajan and Zingales (1998). The authors argue that Rajan and Zingales (1998) implicitly test whether financial intermediaries allow firms to better respond to global shocks to growth opportunities. Second, the authors propose a more efficient alternative test of this hypothesis using statistical techniques developed in the social networks literature. Specifically, they find that countries have more highly correlated growth rates across sectors when they have well-developed financial markets, suggesting that financial markets play an important role in allowing firms to take advantage of global growth opportunities. These results are particularly strong when financial development takes into account both the level and composition of financial development: private banking appears to play a particularly important role in resource allocation. The authors' technique allows them to further distinguish between the "growth opportunities" hypothesis stated above and the alternative "finance and external dependence" hypothesis, which implies that countries with similar levels of financial development should specialize in similar sectors. They do not find evidence to support this alternative view of finance and development.