The Effect of Financial Development on Convergence: Theory and Evidence

The Effect of Financial Development on Convergence: Theory and Evidence

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The Effect of Financial Development on Convergence: Theory and Evidence

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