Finance and Growth: Schumpeter Might Be Wrong in Our Era. New Evidence from Meta-Analysis

Abstract

Purpose – In a meta-study on the finance-growth nexus, we have bridged the gap between Schumpeterian authors and sympathizers of a questionable finance-growth nexus.

Design/methodology/approach – Over 20 fundamental characteristics that have influenced the debate over the last decades have been examined. The empirical evidence is based on 196 outcomes from 20 studies. We assess the degree of heterogeneity and identify causes of the observed differentiation.

Findings – Our findings also show evidence of publication bias. Overall, a genuine effect exists between financial development and economic growth. Schumpeter’s thesis might be wrong in our era because of: endogeneity-based estimations, publication bias and, effects of financial activity. A historical justification has also been discussed.

Originality/value – Very few meta-analysis studies have focused on the finance-growth nexus.

Keywords: Meta analysis; Finance; Economic growth; Publication bias

JEL Classification: C1; C4; E0; O0