The Effect of Financial Development on Convergence: Theory and Evidence

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The Effect of Financial Development on Convergence: Theory and Evidence

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dc.contributor.author Mayer-Foulkes, David
dc.contributor.author Howitt, Peter
dc.contributor.author Aghion, Philippe
dc.date.accessioned 2010-10-14T15:33:22Z
dc.date.issued 2005
dc.identifier.citation Aghion, Philippe, Peter Howitt, and David Mayer-Foulkes. 2005. The effect of financial development on convergence: Theory and evidence. Quarterly Journal of Economics 120, no. 1: 173-222. en_US
dc.identifier.issn 1531-4650 en_US
dc.identifier.issn 0033-5533 en_US
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:4481509
dc.description.abstract We introduce imperfect creditor protection in a multicountry Schumpeterian growth model. The theory predicts that any country with more than some critical level of financial development will converge to the growth rate of the world technology frontier, and that all other countries will have a strictly lower long-run growth rate. We present evidence supporting these and other implications, in the form of a cross-country growth regression with a significant and sizable negative coefficient on initial per-capita GDP (relative to the United States) interacted with financial intermediation. In addition, we find that other variables representing schooling, geography, health, policy, politics, and institutions do not affect the significance of the interaction between financial intermediation and initial per capita GDP, and do not show any independent effect on convergence in the regressions. Our findings are robust to removal of outliers and to alternative conditioning sets, estimation procedures, and measures of financial development. en_US
dc.description.sponsorship Economics en_US
dc.language.iso en_US en_US
dc.publisher MIT Press en_US
dc.relation.isversionof http://dx.doi.org/10.1162/qjec.2005.120.1.173 en_US
dash.license LAA
dc.title The Effect of Financial Development on Convergence: Theory and Evidence en_US
dc.type Journal Article en_US
dc.description.version Version of Record en_US
dc.relation.journal Quarterly Journal of Economics en_US
dash.depositing.author Aghion, Philippe
dc.date.available 2010-10-14T15:33:22Z

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  • FAS Scholarly Articles [7106]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University

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