Patterns of industrial development revisted : the role of finance
AbstractThe authors reexamine the role of financial market development in the intersectoral allocation of resources. First, they characterize the assumptions underlying previous work in this area, in particular, that of Rajan and Zingales (1998). The authors argue that Rajan and Zingales (1998) implicitly test whether financial intermediaries allow firms to better respond to global shocks to growth opportunities. Second, the authors propose a more efficient alternative test of this hypothesis using statistical techniques developed in the social networks literature. Specifically, they find that countries have more highly correlated growth rates across sectors when they have well-developed financial markets, suggesting that financial markets play an important role in allowing firms to take advantage of global growth opportunities. These results are particularly strong when financial development takes into account both the level and composition of financial development: private banking appears to play a particularly important role in resource allocation. The authors'technique allows them to further distinguish between the"growth opportunities"hypothesis stated above and the alternative"finance and external dependence"hypothesis, which implies that countries with similar levels of financial development should specialize in similar sectors. They do not find evidence to support this alternative view of finance and 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 The World Bank in its series Policy Research Working Paper Series with number 2877.
Date of creation: 31 Aug 2002
Date of revision:
Payment Systems&Infrastructure; Economic Theory&Research; Public Health Promotion; Health Monitoring&Evaluation; Economic Conditions and Volatility; Achieving Shared Growth; Governance Indicators; Economic Growth; Health Monitoring&Evaluation; Economic Conditions and Volatility;
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Raghuram G. Rajan & Luigi Zingales, 1996.
"Financial Dependence and Growth,"
NBER Working Papers
5758, National Bureau of Economic Research, Inc.
- Clarke, George R. & Cull, Robert, 1998.
"Why privatize? : the case of Argentina's public provincial banks,"
Policy Research Working Paper Series
1972, The World Bank.
- Clarke, George R. G. & Cull, Robert, 1999. "Why Privatize? The Case of Argentina's Public Provincial Banks," World Development, Elsevier, vol. 27(5), pages 865-886, May.
- King, Robert G & Levine, Ross, 1993.
"Finance and Growth: Schumpeter Might Be Right,"
The Quarterly Journal of Economics,
MIT Press, vol. 108(3), pages 717-37, August.
- La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001.
"Government Ownership of Banks,"
Working Paper Series
rwp01-016, Harvard University, John F. Kennedy School of Government.
- Rafael La Porta & Florencio Lopezde-Silanes & Andrei Shleifer, 2000. "Government Ownership of Banks," NBER Working Papers 7620, National Bureau of Economic Research, Inc.
- Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer, 2000. "Government Ownership of Banks," Harvard Institute of Economic Research Working Papers 1890, Harvard - Institute of Economic Research.
- Stockman, Alan C., 1988.
"Sectoral and national aggregate disturbances to industrial output in seven European countries,"
Journal of Monetary Economics,
Elsevier, vol. 21(2-3), pages 387-409.
- Alan C. Stockman, 1989. "Sectoral and National Aggregate Disturbances to Industrial Output in Seven European Countries," NBER Working Papers 2313, National Bureau of Economic Research, Inc.
- Asli Demirgüç-Kunt & Vojislav Maksimovic, 1998. "Law, Finance, and Firm Growth," Journal of Finance, American Finance Association, vol. 53(6), pages 2107-2137, December.
- Love, Inessa, 2001.
"Financial development and financing constraints - international evidence from the structural investment model,"
Policy Research Working Paper Series
2694, The World Bank.
- Inessa Love, 2003. "Financial Development and Financing Constraints: International Evidence from the Structural Investment Model," Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 765-791, July.
- Tamim Bayoumi & Eswar Prasad, 1997.
"Currency Unions, Economic Fluctuations, and Adjustment: Some New Empirical Evidence,"
IMF Staff Papers,
Palgrave Macmillan, vol. 44(1), pages 36-58, March.
- Eswar Prasad & Tamim Bayoumi, 1996. "Currency Unions, Economic Fluctuations, and Adjustment - Some New Empirical Evidence," IMF Working Papers 96/81, International Monetary Fund.
- Syrquin, Moshe & Chenery, Hollis, 1989. "Three decades of industrialization," MPRA Paper 32771, University Library of Munich, Germany.
- Barth, James R. & Caprio, Gerard & Levine, Ross, 2000. "Banking systems around the globe : do regulation and ownership affect the performance and stability?," Policy Research Working Paper Series 2325, The World Bank.
- 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.
- Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
- Wurgler, Jeffrey, 2000.
"Financial markets and the allocation of capital,"
Journal of Financial Economics,
Elsevier, vol. 58(1-2), pages 187-214.
- Solomon Tadesse, 2005.
"Financial Development and Technology,"
William Davidson Institute Working Papers Series
wp749, William Davidson Institute at the University of Michigan.
- Schündeln, Matthias, 2005. "Modeling Firm Dynamics to Identify the Cost of Financing Constraints in Ghanaian Manufacturing," Proceedings of the German Development Economics Conference, Kiel 2005 29, Verein für Socialpolitik, Research Committee Development Economics.
- Nandini Gupta & Kathy Yuan, 2003. "Financial Dependence, Stock Market Liberalizations, and Growth," William Davidson Institute Working Papers Series 2003-562, William Davidson Institute at the University of Michigan.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.