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Stock markets, credit markets, and technology-led growth
Journal of Financial Intermediation
  • James R. Brown, Iowa State University
  • Gustav Martinsson, Royal Institute of Technology
  • Bruce C. Petersen, Washington University in St. Louis
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Publication Version
Accepted Manuscript
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The high-tech sector accounts for the majority of corporate innovation in modern economies. In a sample of 38 countries, we document a strong positive relation between the initial size of the country's high-tech sector and subsequent rates of GDP and total factor productivity growth. We also find a strong positive connection between a country's equity (but not credit) market development and the size of its high-tech sector. Our main difference-in-differences estimates show that better developed stock markets support faster growth of innovative-intensive, high-tech industries. The main channels for this effect are higher rates of productivity and faster growth in the number of new high-tech firms. Credit market development fosters growth in industries that rely on external finance for physical capital accumulation but is unimportant for growth in innovation-intensive industries. These findings show that stock markets and credit markets play important but distinct roles in supporting economic growth. Stock markets are uniquely suited for financing technology-led growth, a particularly important concern for advanced economies.

This is an accepted manuscript of an article from Journal of Financial Intermediation, 32 (2017); 45-59. DOI: 10.1016/j.jfi.2016.07.002. Posted with permission.

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Creative Commons Attribution-Noncommercial-No Derivative Works 4.0
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Elsevier B.V.
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Citation Information
James R. Brown, Gustav Martinsson and Bruce C. Petersen. "Stock markets, credit markets, and technology-led growth" Journal of Financial Intermediation Vol. 32 (2017) p. 45 - 59
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