Finance, Investment and Growth

Abstract

This paper evaluates the relations between industrial activity and the structure of financial systems, corporate sectors and legal arrangements in different countries. Using data from 20 OECD countries in 27 industries over the period 1970 to 1995, we evaluate whether there is a link between industry activity and a combination of country structures and industry characteristics. We find significant interrelations between the two both in terms of industry growth rates and investment shares. The relations are sensitive to countries' stages of economic development: for example, the link between concentration of ownership and economic activity is of opposite sign in low and high income countries. There is strong evidence that the relations between financial structure and economic activity come through expenditures on R&D rather than fixed capital formation.