Journal Article10.2307/2118406
Finance and Growth: Schumpeter Might Be Right
TL;DR: In this paper, the authors examined a cross-section of about 80 countries for the period 1960-89 and found that various measures of financial development are strongly associated with both current and later rates of economic growth.
read more
Abstract: Joseph Schumpeter argued in 1911 that the services provided by financial intermediaries - mobilizing savings, evaluating projects, managing risk, monitoring managers, and facilitating transactions -stimulate technological innovation and economic development. The authors present evidence that supports this view. Examining a cross-section of about 80 countries for the period 1960-89, they find that various measures of financial development are strongly associated with both current and later rates of economic growth. Each measure has shortcomings but all tell the same story: finance matters. They present three main findings, which are robust to many specification tests: The average level of financial development for 1960-89 is very strongly associated with growth for the period. Financial development precedes growth. For example, financial depth in 1960 (the ratio of broad money to GDP) is positively and significantly related to real per capita GDP growth over the next 30 years even after controlling for a variety of country-specific characteristics and policy indicators. Financial development is positively associated with both investment rate and the efficiency with which economies use capital. Much work remains to be done, but the data are consistent with Schumpeter's view that the services provided by financial intermediaries stimulate long-run growth.
read more
Chat with Paper
AI Agents for this Paper
Find similar papers on Google Scholar, PubMed and Arxiv
Write a critical review of this paper
Analyze citations of this paper to find unaddressed research gaps
Citations
The great reversals: the politics of financial development in the twentieth century
Raghuram G. Rajan,Luigi Zingales +1 more
TL;DR: In this paper, the authors propose an interest group theory of financial development where incumbents oppose financial development because it breeds competition. And the theory predicts that incumbents’ opposition will be weaker when an economy allows both cross-border trade and capital flows.
3.2K
Does Globalization Affect Growth? : evidence from a new Index of Globalization
TL;DR: This article developed an index of globalization covering its three main dimensions: economic integration, social integration, and political integration, using panel data for 123 countries in 1970-2000 and analyzed empirically whether the overall index and sub-indexes constructed to measure the single dimensions affect economic growth.
Stock markets, banks, and economic growth
TL;DR: In this paper, the authors investigate whether measures of stock market liquidity, size, volatility, and integration in world capital markets predict future rates of economic growth, capital accumulation, productivity improvements, and private savings.
2.7K
Law, finance, and firm growth
TL;DR: Demirgut-Kunt and Maksimovic as mentioned in this paper investigated how differences in legal and financial systems affect firms' use of external financing to fund growth and found that firms in countries with well-functioning institutions have lower profit rates.
2.7K
Capital Structures in Developing Countries
TL;DR: This article analyzed the capital structure choices of firms in 10 developing countries and provided evidence that these decisions are affected by the same variables as in developed countries, indicating that specific country factors are at work.
2.7K
References
On the mechanics of economic development
TL;DR: In this article, the authors consider the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development, and compare three models and compared to evidence.
21.5K
The mechanics of economic development
Robert E. Lucas
- 01 Jan 1988
Abstract: This paper considers the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development. Three models are considered and compared to evidence: a model emphasizing physical capital accumulation and technological change, a model emphasizing human capital accumulation through schooling, and a model emphasizing specialized human capital accumulation through learning-by-doing.
20.8K
•Book
The theory of economic development
Joseph A. Schumpeter
- 01 Jan 1934
TL;DR: Buku ini memberikan infmasi tentang aliran melingkar kehidupan ekonomi sebagaimana dikondisikan oleh keadaan tertentu, fenomena fundamental dari pembangunan EKonomi, kredit, laba wirausaha, bunga atas modal, and siklus bisnis as mentioned in this paper.
18.5K
A Contribution to the Empirics of Economic Growth
TL;DR: The authors examined whether the Solow growth model is consistent with the international variation in the standard of living, and they showed that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data.
Endogenous Technological Change
TL;DR: In this paper, the authors show that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.