Investigating the Role of Countries' Income Levels in the Impact of Financial Development on Total Factor Productivity in Selected Countries

The effects of financial market development on promoting capital productivity and economic growth have been widely discussed by endogenous growth models in the economics literature. Financial development can effectively reduce friction in the economic system and promote Total Factor Productivity (TFP) growth through efficiency improvements and technological progress. However, the effect of financial development on capital allocation is not always positive. Resource optimization can promote TFP growth, and resource mismatch can restrain TFP growth; in other words, at different stages of economic development, financial development has a heterogeneous effect on TFP in different countries. Accordingly, the problem facing the present study is how the effect of financial development on the TFP index is affected by the income level of countries. For this purpose, the selected countries were classified into separate income groups, and the relationship between financial development and TFP was tested in these countries during the period ۲۰۱۰-۲۰۲۳. The results of the model estimation in this study show that the coefficient of the financial development variable in high-income countries and middle-income countries is significant and positive, and is ۰.۰۸۲۶ and ۰.۰۱۲۱, respectively, meaning that with a ۱% improvement in the financial development index, TFP in high-income countries and middle-income countries improves by ۰.۰۸% and ۰.۰۱%, respectively. Based on the results of the model estimation in low-income countries, this coefficient is not significant. Accordingly, financial development has not been able to improve the TFP index in low-income countries.The effects of financial market development on promoting capital productivity and economic growth have been widely discussed by endogenous growth models in the economics literature. Financial development can effectively reduce friction in the economic system and promote Total Factor Productivity (TFP) growth through efficiency improvements and technological progress. However, the effect of financial development on capital allocation is not always positive. Resource optimization can promote TFP growth, and resource mismatch can restrain TFP growth; in other words, at different stages of economic development, financial development has a heterogeneous effect on TFP in different countries. Accordingly, the problem facing the present study is how the effect of financial development on the TFP index is affected by the income level of countries. For this purpose, the selected countries were classified into separate income groups, and the relationship between financial development and TFP was tested in these countries during the period ۲۰۱۰-۲۰۲۳. The results of the model estimation in this study show that the coefficient of the financial development variable in high-income countries and middle-income countries is significant and positive, and is ۰.۰۸۲۶ and ۰.۰۱۲۱, respectively, meaning that with a ۱% improvement in the financial development index, TFP in high-income countries and middle-income countries improves by ۰.۰۸% and ۰.۰۱%, respectively. Based on the results of the model estimation in low-income countries, this coefficient is not significant. Accordingly, financial development has not been able to improve the TFP index in low-income countries.

کلیدواژه ها:

Financial development ، Total factor productivity ، Income level ، Panel data