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Land Distribution and Financial System Development

  • Dietrich Vollrath
  • Lennart Erickson

Research on credit markets from developing economies, as well as work on the origin of institutions in general, has suggested that land inequality may play a role in determining financial development. In this paper we establish empirically that initial land inequality is a significant predictor of financial depth across countries, even while controlling for other predictors such as legal origin, ethnic fractionalization, and income inequality. To examine this relationship we have created a new measure of land distribution within countries that builds upon the work of Deininger and Squire (1998) by explicitly accounting for landlessness. In addition to being a significant predictor of financial development, land inequality is found to be uncorrelated with other fundamental characteristics of economies, suggesting its possible use in a wider range of research.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/83.

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Length: 30
Date of creation: 01 Apr 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/83
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  18. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  19. Lennart Erickson & Dietrich Vollrath, 2004. "Dimensions of Land Inequality and Economic Development," IMF Working Papers 04/158, International Monetary Fund.
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  22. Oded Galor & Omer Moav & Dietrich Vollrath, 2004. "Land Inequality and the Origin of Divergence and Overtaking in the Growth Process," GE, Growth, Math methods 0410004, EconWPA.
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