Working Paper: CEPR ID: DP10251
Authors: Diego Comin; Ramana Nanda
Abstract: We examine the extent to which financial market development impacts the diffusion of 16 major technologies, looking across 55 countries, from 1870 to 2000. We find that greater depth in financial markets leads to faster technology diffusion for more capital-intensive technologies, but only in periods closer to the invention of the technology. In fact, we find no differential effect of financial depth on the diffusion of capital-intensive technologies in the late stages of diffusion or in late adopters. Our results are consistent with a view that local financial markets play a critical role in facilitating the process of experimentation that is required for the initial commercialization of technologies. This evidence also points to an important mechanism relating financial market development to technology diffusion and economic growth.
Keywords: banking; experimentation; growth; technology diffusion
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Deeper financial markets (G19) | Accelerate the diffusion of more capital-intensive technologies (O39) |
| Deeper financial markets (G19) | Facilitate the experimentation needed to commercialize new technologies (O36) |
| Financial development (O16) | Diffusion of technologies closer to their date of invention (O33) |
| Income per capita, human capital (O15) | Causal impact of financial development on technology diffusion (O49) |
| Deeper financial markets (G19) | No significant differential effect on late-stage diffusion (C22) |