Impact of primary market on total factor productivity: A cross-country analysis

Figures & data

Table 1. Sources of data used in the study

Data	Source
Data on primary capital raised	Thomson Reuters Eikon
Data on macroeconomic variables	World Bank database^1
Data on financial market variables	World Bank database
Total factor productivity	Conference Board^2

*Data period from 1990–2014.

Figure 1. TFP vs. GDP growth (based on annual summary of data of sample countries).

Figure 2. Primary equity market–TFP graph (based on annual summary of data from sample countries).

Table 2. Summary statistics

Variable	Observations	Mean	Std. Dev.	Min	Max
TFP	2,136	0.52289	3.870096	−54.3287	59.37093
Log GDP/Capita	2,136	8.74421	1.569336	4.800033	11.66662
Primary	2,136	1.239007	2.204517	0	26.44221
Stock	2,136	27.43452	56.46075	0	952.6673
Bank	2,114	63.51344	49.30415	1.125519	312.1536

Table 3. Correlation and partial correlation matrix

	TFP	LogGDP/Capita	Primary	Stock
Log GDP/Capita	−0.0575
Primary	0.0025	0.3119
Stock	0.0275	0.3257	0.5387
Bank	−0.0735	0.5953	0.4025	0.4678

Table 4. Partial correlation matrix (with L.TFP)

Variable	Partial Corr.	Semi-partial Corr.	Partial Corr.^2	Semi-partial Corr.^2	Significance Value
L.TFP	0.2105	0.2088	0.0443	0.0436	0
Log GDP/Capita	−0.0108	−0.0105	0.0001	0.0001	0.0001
Primary	0.0124	0.012	0.0002	0.0001	0
Stock	0.0539	0.0524	0.0029	0.0027	0
Bank	−0.089	−0.0866	0.0079	0.0075	0

Table 5. Estimates with five additional control variables

	Coefficient Estimates for TFP as Dependent Variable
	5 exogenous variables- not as instruments		5 exogenous variables as instruments		5 exogenous variables as instruments
	Difference	System	Difference	System	Difference (w*)	System (w*)
Variable	(1)	(2)	(3)	(4)	(5)	(6)
L.TFP^7	0.0048	0.261**	0.251*	0.242**	0.108	0.132**
Primary	0.618**	0.524**	0.489**	0.500**	0.533***	0.406**
Stock	−0.0125	−0.00974	−0.0016	−0.0107*	0.00413	−0.00361
Bank	−0.0509**	−0.0113	−0.0059	−0.00286	−0.0218	−0.0103
Inflation	−0.0001	0.000523*	0.000131*	0.000308***	0.000102	0.000176***
Schooling	−0.1240	0.0496**	−0.0465	0.00133	−0.0364	0.000534
Expense	0.0897	−0.0532	−0.435***	−0.0599	−0.444***	−0.0166
FDI	−0.0441	0.0282	−0.0131	0.00947	−0.0126	0.00535
Trade	0.173**	−0.0116	−0.0203	−0.00402	−0.016	−0.000186
Year	−0.147*	−0.0285	−0.0326	−0.0221	−0.0359	−0.0318
Constant		55.84		46.18		64.82
Observations	1736	1815	1736	1815	1736	1815
No. of countries	79	79	79	79	79	79
No. of instruments	68	66	73	71	68	72
AR2	0.31	0.357	0.562	0.4	0.111	0.106
Hansen-J (p val)	0.128	0.184	0.309	0.279	0.24	0.411

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%; w* winsorized data.

Table 6. Primary–TFP relationship (difference GMM)

	TFP Growth (Coefficient Estimates and Significance)
Variable	(1)	(2)	(3)
L.TFP	0.256***	0.193*	0.265***
Primary	0.608**	0.505**	0.509**
L.Primary			0.330***
Stock	−0.0108	−0.012*	0.00106
L.Stock			−0.025***
Bank	0.00112	−0.013	−0.00065
L.Bank			−0.0162
Dummy		−1.34**
Primary*Dummy		0.0238
Year	−0.0665*	0.011	−0.00133
Observations	1,940	1,940	1,940
No. of countries	87	87	87
No. of instruments	70	70	71
AR2	0.963	0.812	0.726
Hansen-J (p val)	0.14	0.111	0.128

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%. Dummy takes the value of 1 in the post-2008 period.

Table 7. Primary–TFP relationship (system GMM)

	TFP
Variable	(1)	(2) (w#)	(3)	(4)
L.TFP	0.364***	0.0879	0.363***	0.373***
Primary	0.452**	0.554***	0.450**	0.499*
Stock	−0.00697*	−0.00442	−0.0068*	−0.0076*
Bank	−0.00691	−0.00905	−0.0063	−0.00567
Dummy Income UM or H			−0.188
Dummy Income L or LM				0.424
Year	−0.035***	−0.048***	−0.034**	−0.035**
Constant	70.99***	97.25***	68.78**	69.31**
Observations	2,027	2027	2,027	2,027
No. of countries	87	87	87	87
No. of instruments	68	82	68	68
AR2	0.732	0.205	0.731	0.734
Hansen-J (p val)	0.254	0.325	0.227	0.19

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%; w# implies estimates with data of explanatory variable winsorized at 5%.

Table 8. Impact of income level on Primary–TFP relationship (difference GMM)

	TFP
Variable	(1)	(2)	(3)	(4)
L.TFP	0.278***	0.267***	0.276***	0.265***
Primary	0.553**	0.488**	0.486**	0.851**
Stock	−0.0118	−0.0119*	−0.0106	−0.0112
Bank	0.00463	0.00398	0.0013	0.00159
Primary*Dummy Income L	−0.452
Primary*Dummy Income LM		0.412
Primary*Dummy Income UM			0.545
Primary*Dummy Income H				−0.414
Year	−0.0441	−0.039	−0.0375	−0.0344
Observations	1,940	1,940	1,940	1,940
No. of countries	87	87	87	87
No. of instruments	72	72	72	72
AR2	0.917	0.904	0.973	0.958
Hansen-J (p val)	0.151	0.161	0.164	0.155

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.

Table 9. Impact of income level on Primary–TFP relationship (system GMM)

	TFP
Variable	(1)	(2)	(3)	(4)
L.TFP	0.368***	0.349***	0.363***	0.362***
Primary	0.466**	0.405**	0.462**	0.576**
Stock	−0.00729*	−0.00561	−0.00717*	−0.00612
Bank	−0.00626	−0.00761	−0.00635	−0.00726
Primary*Dummy Income L	−0.292
Primary*Dummy Income LM		0.371
Primary*Dummy Income UM			−0.0509
Primary*Dummy Income H				−0.161
Year	−0.0366***	−0.0349**	−0.0369***	−0.0336**
Constant	73.57***	70.39**	74.22***	67.72***
Observations	2,027	2,027	2,027	2,027
No. of countries	87	87	87	87
No. of instruments	69	69	69	69
AR2	0.765	0.815	0.731	0.733
Hansen-J (p val)	0.215	0.228	0.243	0.243

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.

Table 10. Primary–TFP relationship (winsorized data)

	TFP
Variable	(1)	(2)	(3)
L.TFP	0.140**	0.136*
L.Log GDP			−4.135***
Primary	0.427***	0.503***	0.456**
Stock	−1.33E-02	−0.0041	−0.00504
Bank	−7.21E-05	−0.00999	−0.00343
Year	−0.0499*	−0.0513*	0.206***
Observations	1,940	1,940	1,940
No. of countries	87	87	87
No. of instruments	86	85	74
AR2	0.403	0.364	0.171
Hansen-J (p val)	0.4	0.392	0.163

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.

Table 11. Supply-leading or demand-following arguments (level variables)

Difference GMM Supply Leading at Levels			System GMM Supply Leading at Levels
	TFP	Primary	TFP	Primary
Variable	(1)	(2)	(3)	(4)
TFP Growth		0.0767*		0.0677
L.TFP	0.265***	−0.0249	0.373***	−0.0926
Primary	0.509**		0.346*
L.Primary	0.330***	−0.192***	−0.0518	0.158*
Stock	0.00106	0.0289***	0.0126**	0.0308***
L.Stock	−0.0253***	−0.00133	−0.0172***	−0.0125***
Bank	−0.000653	−0.00225	−0.0151	0.0121
L.Bank	−0.0162	0.00285	0.0121	−0.00769
Year	−0.00133	0.00341	−0.0365***	−0.00519
Constant			73.31***	10.63
Observations	1,940	1,940	2,027	2,027
No. of countries	87	87	87	87
No. of instruments	71	71	68	67
AR2	0.726	0.59	0.688	0.06
Hansen-J (p val)	0.128	0.446	0.198	0.417

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.

Table 12. Structural relationship of finance–growth

Variable	D.TFP		D.Primary		D.Stock		D.Bank
	Difference	System	Difference	System	Difference	System	Difference	System
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
D.TFP^10			0.0990**	0.136**	−0.472	0.0343	−0.515***	−1.159***
LD.TFP^11	−0.213*	−0.262***	−0.0107	0.0312	−0.271	−0.0325	−0.232*	−0.293**
LD.Primary	0.831***	0.693***	−0.468***	−0.524***	7.622***	8.312***	0.436	1.563***
D.Primary	0.577**	0.545***			10.23***	12.54***	−0.0706	1.202**
LD.Stock	−0.0216***	−0.0203*	−0.00281	−0.00406	−0.0527	−0.00919	0.00672	−0.0511**
D.Stock	−0.00778	0.000498	0.0293***	0.024***			0.0198	−0.00552
LD.Bank	0.0147	0.0433	0.0377*	0.0212	0.085	0.0361	−0.0577	0.126*
D.Bank	−0.0797**	−0.168***	−0.00165	0.0362*	0.199	−0.0202
Year	−0.0356*	−0.0335***	0.00435	0.00419	−0.154**	−0.109**	−0.0835**	−0.0532**
Constant		67.34***		−8.454		218.4**		107.7**
Observations	1,853	1,940	1,853	1,940	1,853	1,940	1,853	1,940
No. of countries	87	87	87	87	87	87	87	87
No. of instruments	84	82		82		82		82
AR2	0.24	0.114	0.386	0.52	0.091	0.165	0.434	0.899
Hansen-J (pval)	0.3	0.318	0.459	0.425	0.531	0.219	0.313	0.631

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.

Table 13. Panel VAR on TFP–Primary relationship

	TFP	Primary	Stock	Bank
Variable	(1)	(2)	(3)	(4)
L.TFP	0.0453	−0.0426	−0.62	0.156
L.Primary	0.425***	−0.258**	1.746	0.548
L.Stock	−0.0237***	0.0132***	0.542***	−0.0122
L.Bank	−0.00555	0.0143	0.487**	0.601***
Year	−0.023	0.00256	−0.0437	0.753**
Observations	1,940	1,940	1,940	1,940
No. of countries	87	87	87	87
Hansen-J (P-value)	0.357	0.528	0.39	0.399
AR(2)	0.249	0.227	0.098	0.705

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.

Table 14. Cointegration test on TFP–Primary relationship

DependentVariable	Panel Statistics				Group Statistics
	V	rho	t	adf	rho	t	adf
TFP	2.84	−5.535***	−21.05***	−11.75***	−2.648***	−22.92***	−8.981***
Primary	2.327	−8.384***	−26.08***	−18.52***	−5.284***	−27.9***	−18.03***
STOCK	−0.4377	1.543	−4.418***	1.054	4.304	−3.631***	2.674
BANK	−4.541***	6.308	3.179	6.527	8.554	4.107	5.724

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.

Figure 3. GDP vs. TFP (H economies).

Figure 4. GDP vs. TFP (non-H economies).

Table 15. TFP and non-TFP growth summary

Period 1994–2014		TFP Growth	GDP/Capita Growth	Primary equity market/GDP
H economies	Average	0.30	2.38	1.75
	Std. dev	3.066	10.066	2.631
Non-H economies	Average	0.72	7.17	1.14
	Std. dev	3.824	18.673	1.270

Table 16. GMM output on Growth–Primary–TFP relationship

Variable	Non-H Economies	H Economies
Log GDP/capita	(1)	(2)
L.Log GDP per capita	1.039***	0.7578***
Primary	0.0315*	−0.010
Stock	0.000671	0.0002
Bank	−0.00628*	0.0015**
TFP Growth	0.0339***	0.0195**
Year	0.0064	0.0049
No. of observations	1,102	838
No. of countries	59	49
No. of instruments	51	45
AR3	0.862	0.105
Hansen-J (p val)	0.306	0.235

Note: *** implies significant at 1%; ** implies significant at 5%; * implies significant at 10%.