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Specialization, Intermediation, and Growth

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  • Alexander Galetovic

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    Abstract

    In market economies financial intermediaries develop during the early stages of industrialization. This paper argues that it occurs because as firms specialize the number of transactions involving credit increases. The main conclusions of the paper are : (a) when increased specialization is a necessary condition for growth, sustained growth may not start if financial intermediaries do not emerge. In this sense, intermediaries are a necessary condition for growth to start and persist; (b) when firms specialize intermediaries endogenously emerge, because they prevent the duplication of monitoring effort. Thus, it is specialization in the real sector which causes the emergence of intermediaries.

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    Bibliographic Info

    Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 1.

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    Date of creation: 1996
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    Handle: RePEc:edj:ceauch:1

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    Web page: http://www.dii.uchile.cl/cea/
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    Cited by:
    1. Antonelli Cristiano & Gehringer Agnieszka, 2013. "Demand pull and technological flows within innovation systems: the intra-European evidence," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201303, University of Turin.
    2. Almeida, Heitor & Wolfenzon, Daniel, 2005. "The effect of external finance on the equilibrium allocation of capital," Journal of Financial Economics, Elsevier, vol. 75(1), pages 133-164, January.
    3. Stelios Michalopoulos & Luc Lueven & Ross Levine, 2010. "Financial Innovation and Endogenous Growth," Discussion Papers Series, Department of Economics, Tufts University 0746, Department of Economics, Tufts University.
    4. Philippe Aghion & Peter Howitt & David Mayer-Foulkes, 2004. "The Effects of Financial Development on Convergence: Theory and Evidence," DEGIT Conference Papers c009_021, DEGIT, Dynamics, Economic Growth, and International Trade.
    5. Santiago Carbó Valverde & Francisco Rodríguez Fernández, 2004. "The finance-growth nexus: a regional perspective," Economic Working Papers at Centro de Estudios Andaluces E2004/44, Centro de Estudios Andaluces.
    6. Riccardo Lucchetti & Luca Papi & Alberto Zazzaro, 2001. "Banks´ Inefficiency and Economic Growth A Micro-Macro Approach," Development Working Papers 153, Centro Studi Luca d\'Agliano, University of Milano.
    7. Almeida, Heitor & Wolfenzon, Daniel, 2006. "Should business groups be dismantled? The equilibrium costs of efficient internal capital markets," Journal of Financial Economics, Elsevier, vol. 79(1), pages 99-144, January.
    8. Drees, Burkhard & Eckwert, Bernhard, 2010. "Implications of more precise information for technological development and economic welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 34(2), pages 266-279, February.
    9. Carton, Christine & Ronquillo, Cely, 2008. "Determinantes del crecimiento en America Latina: Analisis empirico de los sistemas bancarios
      [Economic growth determinants in Latin American region: An empirical analysis based on bank systems role
      ," MPRA Paper 10832, University Library of Munich, Germany.

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