Finance, Investment and Growth

This paper examines the relation between the institutional structures of advanced OECD countries and the comparative growth and investment of 27 industries in those countries over the period 1970 to 1995. The underlying thesis that the paper examines is that there is a matching between the institutional structures of countries and the characteristics of industries, which is reflected in the comparative growth and investment of industries in different countries. We find support for this hypothesis and report that the marked differences in institutional structure that exist across advanced countries are associated with comparative growth and investment of different industries. Consistent with theory, we find that relations between institutional structures and investment differ between fixed investment and research and development, and that relations between institutions and growth are sensitive to the relative degree of development of countries.