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Financial Intermediation and TFP Differences

Author

Listed:
  • Erwan Quintin
  • Pedro Amaral

Abstract

Countries differ markedly with respect to income per capita. These differences cannot be accounted for by differences in factors of production, which means that measured TFP varies significantly across countries. Countries that have a poorly developed financial intermediation sector tend to be poorer and have a lower TFP. We develop a theory of TFP based on the efficiency of the financial intermediation sector, where entrepreneurs that require funds to finance their establishments are subject to an endogenous borrowing constraint. We then compare model economies calibrated to replicate real world economies with varying degrees of financial intermediation, from which we can draw quantitative implications. Such experiments can account for roughly a factor of 2 in the variation of TFP

Suggested Citation

  • Erwan Quintin & Pedro Amaral, 2004. "Financial Intermediation and TFP Differences," 2004 Meeting Papers 377, Society for Economic Dynamics.
    • Handle: RePEc:red:sed004:377
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    More about this item

    Keywords

    TFP; Financial Intermediation;

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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