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Financial intermediation and employment

  • Manoj Pant

    (Jawaharlal Nehru University)

  • Prabal Roy Chowdhury


    (Indian Statistical Institute, New Delhi)

  • Gurbachan Singh

    (Jawaharlal Nehru University)

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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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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  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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