Working Paper: NBER ID: w15792
Authors: Yuriy Gorodnichenko; Monika Schnitzer
Abstract: This paper examines micro-level channels of how financial development can affect macroeconomic outcomes like the level of income and export intensity. We investigate theoretically and empirically how financial constraints affect a firm's innovation and export activities, using unique firm survey data which provides direct measures for innovations and firm-specific financial constraints. We find that financial constraints restrain the ability of domestically owned firms to innovate and export and hence to catch up to the technological frontiers. This negative effect is amplified as financial constraints force export and innovation activities to become substitutes although they are generally natural complements.
Keywords: Financial Constraints; Innovation; Export Activities; Economic Development
JEL Codes: F1; G3; O16; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Innovation (O35) | Productivity (O49) |
| Financial Constraints (D20) | Technological Frontier Catch-Up (O33) |
| Financial Constraints (D20) | Less Productive Firms (D21) |
| Easing Financial Constraints (G59) | Amplified Innovation Efforts (O36) |
| Easing Financial Constraints (G59) | Increased Productivity Levels (O49) |
| Foreign-Owned Firms (F23) | Higher Productivity (O49) |
| Foreign-Owned Firms (F23) | Higher Innovation Levels (O39) |
| Financial Constraints (D20) | Innovation (O35) |
| Financial Constraints (D20) | Export Activities (Y10) |