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Financial intermediation and employment

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  • Manoj Pant

    (Jawaharlal Nehru University)

  • Prabal Roy Chowdhury

    ()
    (Indian Statistical Institute, New Delhi)

  • Gurbachan Singh

    (Jawaharlal Nehru University)

Abstract

This paper explores the relationship between financial intermediation and employment. We explain why some economies have low financial intermediation even when financial intermediation is safe. Moreover, we seek to explain why these economies tend to be poor and vulnerable, and also have large self-employment even when the latter has low productivity. We model safe but unsound banks and show that the effects of bad banking can be overcome only partially by corrective taxes. The model is extended to incorporate the illegal sector of the economy as well as the labor laws.

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Bibliographic Info

Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 04-22.

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Length: 33 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:ind:isipdp:04-22

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Keywords: Financial intermediation; self-employment; tax; labor laws;

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  1. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  2. Simon Johnson, 2000. "Tunneling," American Economic Review, American Economic Association, vol. 90(2), pages 22-27, May.
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  4. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1999. "Investor Protection and Corporate Valuation," Harvard Institute of Economic Research Working Papers 1882, Harvard - Institute of Economic Research.
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  7. Simon Parker & Tim Barmby & Yacine Belghitar, 2004. "Wage Uncertainty And The Labour Supply Of Self-Employed Workers," Royal Economic Society Annual Conference 2004 67, Royal Economic Society.
  8. World Bank, 2001. "Finance for Growth : Policy Choices in a Volatile World," World Bank Publications, The World Bank, number 13895.
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  13. Caprio, Gerard & Honohan, Patrick, 2001. "Finance for Growth: Policy Choices in a Volatile World," MPRA Paper 9929, University Library of Munich, Germany.
  14. Levine, Ross, 1992. "Financial intermediary services and growth," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 383-405, December.
  15. Stiglitz, Joseph E, 1985. "Credit Markets and the Control of Capital," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 133-52, May.
  16. Yamada, Gustavo, 1996. "Urban Informal Employment and Self-Employment in Developing Countries: Theory and Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 289-314, January.
  17. Ben S. Bernanke, 1983. "Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression," NBER Working Papers 1054, National Bureau of Economic Research, Inc.
  18. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
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