Legal-Political Factors and the Historical Evolution of the Finance-Growth Link
33 Pages Posted: 4 May 2006 Last revised: 22 May 2022
Date Written: February 2006
Abstract
Recent cross-country investigations of the role of institutional fundamentals such as the protection of property rights in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this paper we pursue this new direction by considering relationships between finance, growth, legal origin, and political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a county's legal origin (i.e., English, French, German, or Scandinavian) and financial development are roughly consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper "fundamentals," however, a significant part of the growth-enhancing role of financial development remains unexplained by them.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Financial Dependence and Growth
By Raghuram G. Rajan and Luigi Zingales
-
Stock Markets, Banks, and Growth: Panel Evidence
By Thorsten Beck and Ross Levine
-
Stock Markets, Banks, and Growth: Panel Evidence
By Thorsten Beck and Ross Levine
-
Stock Markets, Banks, and Economic Growth
By Ross Levine and Sara Zervos
-
Financial Development and Economic Growth: Views and Agenda
By Ross Levine
-
Stock Markets, Banks, and Growth: Correlation or Causality
By Thorsten Beck and Ross Levine
-
By Thorsten Beck, Asli Demirgüç-kunt, ...
-
Finance, Firm Size, and Growth
By Thorsten Beck, Asli Demirgüç-kunt, ...
-
Finance, Firm Size, and Growth
By Thorsten Beck, Asli Demirgüç-kunt, ...
-
Financial Intermediation and Growth: Causality and Causes
By Ross Levine, Norman Loayza, ...