Trade Credit, Financial Intermediary Development and Industry Growth

Recent work suggests that financial development is important for economic growth, since financial markets more effectively allocate capital to firms with high value projects. For firms in poorly developed financial markets, implicit borrowing in the form of trade credit may provide an alternative source of funds. We show that industries with higher dependence on trade credit financing exhibit higher rates of growth in countries with weaker financial institutions. Furthermore, consistent with barriers to trade credit access among young firms, we show that most of the effect that we report comes from growth in the size of pre-existing firms.

Patterns of industrial development revisted : the role of finance

The authors reexamine the role of financial market development in the intersectoral allocation of resources. First, they characterize the assumptions underlying previous work in this area, in particular, that of Rajan and Zingales (1998). The authors argue that Rajan and Zingales (1998) implicitly test whether financial intermediaries allow firms to better respond to global shocks to growth opportunities. Second, the authors propose a more efficient alternative test of this hypothesis using statistical techniques developed in the social networks literature. Specifically, they find that countries have more highly correlated growth rates across sectors when they have well-developed financial markets, suggesting that financial markets play an important role in allowing firms to take advantage of global growth opportunities. These results are particularly strong when financial development takes into account both the level and composition of financial development: private banking appears to play a particularly important role in resource allocation. The authors'technique allows them to further distinguish between the"growth opportunities"hypothesis stated above and the alternative"finance and external dependence"hypothesis, which implies that countries with similar levels of financial development should specialize in similar sectors. They do not find evidence to support this alternative view of finance and development.Payment Systems&Infrastructure,Economic Theory&Research,Public Health Promotion,Health Monitoring&Evaluation,Economic Conditions and Volatility,Achieving Shared Growth,Governance Indicators,Economic Growth,Health Monitoring&Evaluation,Economic Conditions and Volatility

Financial development and growth in the short and long run

The authors analyze the relationship between financial development and inter-industry resource allocation in the short and long run. They suggest that in the long run, economies with high rates of financial development will devote relatively more resources to industries with a"natural"reliance on outside finance due to a comparative advantage in these industries. By contrast, in the short run the authors argue that financial development facilitates the reallocation of resources to industries with good growth opportunities, regardless of their reliance on outside finance. To test these predictions, they use a measure of industry-level"technological"financial dependence based on the earlier work of Rajan and Zingales (1998) and develop new proxies for shocks to (short-run) industry growth opportunities. The authors find differential effects of these measures on industry growth and composition in countries with different levels of financial development. They obtain results that are consistent with financially developed economies specializing in"financially dependent"industries in the long run, and allocating resources to industries with high growth opportunities in the short run.Public Health Promotion,Health Monitoring&Evaluation,Banks&Banking Reform,Water and Industry,Payment Systems&Infrastructure,Achieving Shared Growth,Water and Industry,Governance Indicators,Health Monitoring&Evaluation,Banks&Banking Reform

Financial Development and the Composition of Industrial Growth

We re-examine the role of financial market development in the intersectoral allocation of resources. Specifically, we propose the use of a new methodology that looks at the co-movement in growth rates across pairs of countries to examine the role of financial development in allowing firms to take advantage of growth opportunities. Our model begins with the assumption that there exist common global shocks to growth opportunities, and we hypothesize that countries should therefore have correlated patterns of growth if they are able to take advantage of these shocks. We find that countries have more highly correlated growth rates across sectors when both countries have well-developed financial markets; this is consistent with financial markets playing an important role in allowing firms to take advantage of global growth opportunities. We further observe that growth opportunities will be more similar for countries that are at similar levels of economic development. This allows for a further refinement of our initial test: the impact of financial development on country-pair co-movement is much stronger between country pairs at similar levels of economic development. Finally, we note that our results imply that private banking appears to play a particularly important role in resource allocation, as our results are particularly strong when financial development takes into account both the level and composition of financial market institutions.

Trade credit, financial intermediary development, and industry growth

Recent empirical work has shown that financial development is important for economic growth, since well-developed financial markets are more effective at allocating capital to firms with high-value projects. This raises the question of whether firms with high return projects in countries with poorly developed financial institutions, are able to draw on alternative sources of capital, to offset the effects of deficient (formal) financial intermediaries. Recent work suggests that implicit borrowing, in the form of trade credit, may provide one such source of funds. Using the methodology of Rajan and Zingales (1998), the authors show that in countries with relatively weak financial institutions, industries with greater dependence on trade credit financing (measured by the ratio of accounts payable to total assets) grow faster than industries that rely less on such credit. Furthermore, consistent with the notion that young firms may not use trade credit, the authors show that most of the effect they report, comes from growth in preexisting firms, rather than from an increase in the number of firms.International Terrorism&Counterterrorism,Payment Systems&Infrastructure,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation,Housing Finance

Wordplay in Radio Contests

An automobile dealer in Tuscon, Arizona ran a radio commercial in October 1985 which featured a word game. The advertisement was on twelve different stations, and saturated the airways for two weeks with six to eight spots a day. It was the talk of the town

Trapping and Wiggling: Elastohydrodynamics of Driven Microfilaments

We present a general theoretical analysis of semiflexible filaments subject to viscous drag or point forcing. These are the relevant forces in dynamic experiments designed to measure biopolymer bending moduli. By analogy with the ``Stokes problems" in hydrodynamics (fluid motion induced by that of a wall bounding a viscous fluid), we consider the motion of a polymer one end of which is moved in an impulsive or oscillatory way. Analytical solutions for the time-dependent shapes of such moving polymers are obtained within an analysis applicable to small-amplitude deformations. In the case of oscillatory driving, particular attention is paid to a characteristic length determined by the frequency of oscillation, the polymer persistence length, and the viscous drag coefficient. Experiments on actin filaments manipulated with optical traps confirm the scaling law predicted by the analysis and provide a new technique for measuring the elastic bending modulus. A re-analysis of several published experiments on microtubules is also presented.Comment: RevTex, 24 pages, 15 eps figs, uses cite.sty, Biophysical

Twirling and Whirling: Viscous Dynamics of Rotating Elastica

Motivated by diverse phenomena in cellular biophysics, including bacterial flagellar motion and DNA transcription and replication, we study the overdamped nonlinear dynamics of a rotationally forced filament with twist and bend elasticity. Competition between twist injection, twist diffusion, and writhing instabilities is described by a novel pair of coupled PDEs for twist and bend evolution. Analytical and numerical methods elucidate the twist/bend coupling and reveal two dynamical regimes separated by a Hopf bifurcation: (i) diffusion-dominated axial rotation, or twirling, and (ii) steady-state crankshafting motion, or whirling. The consequences of these phenomena for self-propulsion are investigated, and experimental tests proposed.Comment: To be published in Physical Review Letter

The Viscous Nonlinear Dynamics of Twist and Writhe

Exploiting the "natural" frame of space curves, we formulate an intrinsic dynamics of twisted elastic filaments in viscous fluids. A pair of coupled nonlinear equations describing the temporal evolution of the filament's complex curvature and twist density embodies the dynamic interplay of twist and writhe. These are used to illustrate a novel nonlinear phenomenon: ``geometric untwisting" of open filaments, whereby twisting strains relax through a transient writhing instability without performing axial rotation. This may explain certain experimentally observed motions of fibers of the bacterium B. subtilis [N.H. Mendelson, et al., J. Bacteriol. 177, 7060 (1995)].Comment: 9 pages, 4 figure