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Essays on the size of the financial aector, financial liberalization and growth

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  • Kneer, E.C.

    (Tilburg University)

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    Abstract

    Abstract: Financial systems have grown dramatically over the decade leading up to the Global Financial Crisis. This thesis explores some of the channels through which large financial systems might hurt the economy. The first part focuses on the composition of financial services. It examines whether intermediation services and “non-intermediation” activities have differential effects on economic growth and growth volatility. It is found that intermediation activities increase growth and reduce volatility in the long run. An expansion of the financial sectors along other dimensions has no long-run effect on real sector outcomes. Over shorter time horizons non-intermediation activities stimulate growth at the cost of higher volatility especially in high-income countries. The second part examines how the absorption of talent into the financial sector affects productivity and growth of real sectors. My evidence shows that financial liberalization is associated with skill-upgrading in the financial sector. I exploit variation in financial liberalization patterns across US states and across a sample of 13 mostly European countries to identify the effect of the absorption of talent into finance. Consistent with the existence of a brain-drain effect, my estimates show that financial liberalization decreases productivity and growth disproportionally in manufacturing industries which are skill-or R&D-intensive.

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    Bibliographic Info

    Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-5930486.

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    Length: 124
    Date of creation: 2013
    Date of revision:
    Publication status: Published
    Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-5930486

    Note: Dissertation
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    Web page: http://www.tilburguniversity.edu/

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    References

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    17. Thomas Philippon & Ariell Reshef, 2013. "An International Look at the Growth of Modern Finance," Journal of Economic Perspectives, American Economic Association, vol. 27(2), pages 73-96, Spring.
    18. Patrick Bolton & Tano Santos & Jose A. Scheinkman, 2011. "Cream Skimming in Financial Markets," NBER Working Papers 16804, National Bureau of Economic Research, Inc.
    19. Mary O'Mahony & Marcel P. Timmer, 2009. "Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database," Economic Journal, Royal Economic Society, vol. 119(538), pages F374-F403, 06.
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