Does Economic Diversification Lead to Financial Development? Evidence from Topography
AbstractAn influential theoretical literature has observed that economic diversification can reduce risk and increase financial development. But causality operates in both directions, as a well functioning financial system can enable a society to invest in more productive but risky projects, thereby determining the degree of economic diversification. Thus, ordinary least squares (OLS) estimates of the impact of economic diversification on financial development are likely to be biased. Motivated by the economic geography literature, this paper uses instruments derived from topographical characteristics to estimate the impact of economic diversification on the development of finance. The fourth estimates suggest a large and robust role for diversification in shaping financial development. And these results imply that, by impeding financial sector development, the concentration of economic activity common in developing countries can adversely affect financial and economic development.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 06/35.
Date of creation: 01 Jan 2006
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-05 (All new papers)
- NEP-DEV-2006-03-05 (Development)
- NEP-FMK-2006-03-05 (Financial Markets)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Esteban Jaimovich, 2007.
"Sectoral Differentiation, Allocation of Talent, and Financial Development,"
Carlo Alberto Notebooks
59, Collegio Carlo Alberto, revised 2009.
- Jaimovich, Esteban, 2011. "Sectoral differentiation, allocation of talent, and financial development," Journal of Development Economics, Elsevier, vol. 96(1), pages 47-60, September.
- Nathan Nunn & Diego Puga, 2009.
"Ruggedness: The Blessing of Bad Geography in Africa,"
NBER Working Papers
14918, National Bureau of Economic Research, Inc.
- Nathan Nunn & Diego Puga, 2012. "Ruggedness: The Blessing of Bad Geography in Africa," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 20-36, February.
- Nathan Nunn & Diego Puga, 2007. "Ruggedness: The blessing of bad geography in Africa," Working Papers 2007-09, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales, revised 01 May 2010.
- Nunn, Nathan & Puga, Diego, 2007. "Ruggedness: The Blessing of Bad Geography in Africa," CEPR Discussion Papers 6253, C.E.P.R. Discussion Papers.
- KAMGNA, Severin Yves, 2007.
"Diversification économique en Afrique centrale : Etats des lieux et enseignements
[Economic diversification in central Africa]," MPRA Paper 9602, University Library of Munich, Germany.
- Naude, Wim & Rossouw, Riaan, 2008. "Export Diversification and Specialization in South Africa: Extent and Impact," Working Paper Series RP2008/93, World Institute for Development Economic Research (UNU-WIDER).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.