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Financial Intermediation and Growth: Causality and Causes
- JOURNAL OF MONETARY ECONOMICS
, 2000
"... This paper evaluates (1) whether the exogenous component of financial intermediary development influences economic growth and (2) whether cross-country differences in legal and accounting systems (e.g., creditor rights, contract enforcement, and accounting standards) explain differences in the level ..."
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Cited by 819 (72 self)
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This paper evaluates (1) whether the exogenous component of financial intermediary development influences economic growth and (2) whether cross-country differences in legal and accounting systems (e.g., creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental variable procedures and recent dynamic panel techniques, we find that the exogenous components of financial intermediary development is positively associated with economic growth. Also, the data show that cross-country differences in legal and accounting systems help account for differences in financial development. Together, these findings suggest that legal and accounting reforms that strengthen creditor rights, contract enforcement, and accounting practices can boost financial development and accelerate economic growth.
Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants
- Review of Economic Studies
, 2002
"... This paper empirically investigates the effects of liberalized trade on plant productivity in the case of Chile. Chile presents an interesting setting to study this relationship since it underwent a massive trade liberalization that significantly exposed its plants to competition from abroad during ..."
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Cited by 555 (16 self)
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This paper empirically investigates the effects of liberalized trade on plant productivity in the case of Chile. Chile presents an interesting setting to study this relationship since it underwent a massive trade liberalization that significantly exposed its plants to competition from abroad during the late 1970s and early 1980s. Methodologically, I approach this question in two steps. In the first step, I estimate a production function to obtain a measure of plant productivity. I estimate the production function semiparametrically to correct for the presence of selection and simultaneity biases in the estimates of the input coefficients required to construct a productivity measure. I explicitly incorporate plant exit in the estimation to correct for the selection problem induced by liquidated plants. These methodological aspects are important in obtaining a reliable plant-level productivity measure based on consistent estimates of the input coefficients. In the second step, I identify the impact of trade on plants’ productivity in a regression framework allowing variation in productivity over time and across tradedand nontraded-goods sectors. Using plant-level panel data on Chilean manufacturers, I find evidence of within plant productivity improvements that can be attributed to a liberalized trade for the plants in the import-competing sector. In many cases, aggregate productivity improvements stem from the reshuffling of resources and output from less to more efficient producers.
How to do xtabond2: An introduction to “Difference” and “System” GMM in Strata
- CENTER FOR GLOBAL DEVELOPMENT, WORKING PAPER NO. 103
, 2006
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It’s Not Factor Accumulation: Stylized Facts and Growth Models,” World Bank.
, 2001
"... Abstract: We document five stylized facts of economic growth. (1) The "residual" rather than factor accumulation accounts for most of the income and growth differences across nations. (2) Income diverges over the long run. (3) Factor accumulation is persistent while growth is not persiste ..."
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Cited by 427 (14 self)
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Abstract: We document five stylized facts of economic growth. (1) The "residual" rather than factor accumulation accounts for most of the income and growth differences across nations. (2) Income diverges over the long run. (3) Factor accumulation is persistent while growth is not persistent and the growth path of countries exhibits remarkable variation across countries. (4) Economic activity is highly concentrated, with all factors of production flowing to the richest areas. (5) National policies closely associated with long-run economic growth rates. We argue that these facts do not support models with diminishing returns, constant returns to scale, some fixed factor of production, and that highlight the role of factor accumulation. Empirical work, however, does not yet decisively distinguish among the different theoretical conceptions of "total factor productivity growth." Economists should devote more effort towards modeling and quantifying total factor productivity.
GMM estimation with persistent panel data: an application to production functions
, 1998
"... We consider the estimation of Cobb-Douglas production functions using panel data covering a large sample of companies observed for a small number of time periods. Standard GMM estimators, which eliminate unobserved firm-specific effects by taking first dierences, have been found to produce unsatisf ..."
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Cited by 395 (7 self)
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We consider the estimation of Cobb-Douglas production functions using panel data covering a large sample of companies observed for a small number of time periods. Standard GMM estimators, which eliminate unobserved firm-specific effects by taking first dierences, have been found to produce unsatisfactory results in this context (Mairesse and Hall, 1996). We attribute this to weak instruments: the series on firm sales, capital and employment are highly persistent, so that lagged levels are only weakly correlated with subsequent first dierences. As shown in Blundell and Bond (1998
Measuring and explaining management practices across firms and countries
- CEP Discussion Paper No 716. Centre for Economic Performance London School of Economics and Political Science
, 2006
"... Centre for Economic Performance and the LSE We use an innovative survey tool to collect management practice data from 732 medium sized manufacturing firms in the US and Europe (France, Germany and the UK). Our measures of managerial best practice are strongly associated with superior firm performanc ..."
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Cited by 252 (38 self)
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Centre for Economic Performance and the LSE We use an innovative survey tool to collect management practice data from 732 medium sized manufacturing firms in the US and Europe (France, Germany and the UK). Our measures of managerial best practice are strongly associated with superior firm performance in terms of productivity, profitability, Tobin’s Q, sales growth and survival. We also find significant intercountry variation with US firms on average better managed than European firms, but a much greater intra-country variation with a long tail of extremely badly managed firms. This presents a dilemma – why do so many firms exist with apparently inferior management practices, and why does this vary so much across countries? We find this is due to a combination of: (i) low product market competition and (ii) family firms passing management control down to the eldest sons (primo geniture). European firms in our sample report facing lower levels of competition, and substantially higher levels of primo geniture. These two factors appear to account for around half of the long tail of badly managed firms and half of the average US-Europe gap in management performance. JEL No. O32, O33
INCOME VARIANCE DYNAMICS AND HETEROGENEITY
"... Recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance. In this paper the assumption of i.i.d. income innovations used in previous empirical studies is removed and the focus of the analysis ..."
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Cited by 242 (21 self)
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Recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance. In this paper the assumption of i.i.d. income innovations used in previous empirical studies is removed and the focus of the analysis placed on models for the conditional variance of income shocks, which is related to the measure of risk emphasized by the theory. We first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components. We allow for education- and time-specific differences in the stochastic process for earnings and for measurement error. The conditional variance of the income shocks is modelled as a parsimonious ARCH process with both observable and unobserved heterogeneity. The empirical analysis is conducted on data drawn from the 1967-1992 Panel Study of Income Dynamics. We find strong evidence of sizeable ARCH effects as well as evidence of unobserved heterogeneity in the variances.
A Note on the Theme of Too Many Instruments
"... The Difference and System generalized method of moments (GMM) estimators are growing in popularity, thanks in part to specialized software. But as implemented in these packages, the estimators easily generate results by default that are at once invalid yet appear valid in specification tests. The cu ..."
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Cited by 227 (3 self)
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The Difference and System generalized method of moments (GMM) estimators are growing in popularity, thanks in part to specialized software. But as implemented in these packages, the estimators easily generate results by default that are at once invalid yet appear valid in specification tests. The culprit is their tendency to generate instruments that are a) numerous and, in System GMM, b) suspect. A large collection of instruments, even if individually valid, can be collectively invalid in finite samples because they overfit endogenous variables. They also weaken the Hansen test of overidentifying restrictions, which is commonly relied upon to check instrument validity. This paper reviews the evidence on the effects of instrument proliferation, and describes and simulates simple ways to control it. It illustrates the dangers by replicating two early applications to economic
