Finance and Development: is Schumpeter’s Analysis still relevant?
In recent years numerous studies have been published highlighting the role of financial structures in the development process of contemporary economies.1 These works represent a break with a widely-held theoretical view holding that income, wealth and economic growth are independent of the monetary and financial variables, and which thus considers money and the financial structure as neutral variables.2 In these recent studies there is always a reference to the pioneering work of Schumpeter; in many cases it is just a superficial mention, in other ones and in particular in the writings of Rajan and Zingales (2003a, 2003b, 2003c), important elements of Schumpeter’s theoretical framework are used. Hence, these works afford us an interesting opportunity to re-evaluate the importance of Schumpeter’s contribution.3 The thesis put forward in this paper is that while they do indeed highlight important elements of Schumpeter’s theory, Rajan and Zingales do not take the implications thereof into account and, furthermore, they neglect certain fundamental aspects of the Schumpeterian analysis that are closely connected with the parts that they consider. This renders their work incomplete, and prevents their analysis from achieving the coherence of Schumpeter’s theory. This paper is divided into two parts. In the first part, the most important points of the analysis of Rajan and Zingales are described; in the second part, the elements of Schumpeter’s theory that they overlook are pointed out, and it is shown that by using the Schumpeterian theoretical framework it is possible to analyse the relation between financial structure and economic system growth in a more coherent and in-depth way than the one used by Rajan and Zingales.
|Date of creation:||Jul 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Via Ravasi 2-21100 Varese|
Web page: http://www.uninsubria.it/uninsubria/facolta/econo.html
More information through EDIRC
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.:
- Levine, Ross, 1996.
"Financial development and economic growth : views and agenda,"
Policy Research Working Paper Series
1678, 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, 2002.
"Bank-Based or Market-Based Financial Systems: Which Is Better?,"
Journal of Financial Intermediation,
Elsevier, vol. 11(4), pages 398-428, October.
- Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," NBER Working Papers 9138, National Bureau of Economic Research, Inc.
- Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," William Davidson Institute Working Papers Series 442, William Davidson Institute at the University of Michigan.
- Raghuram G. Rajan & Luigi Zingales, .
"Financial Dependence and Growth,"
CRSP working papers
344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier.
- Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
- Gorton, Gary & Winton, Andrew, 2003.
Handbook of the Economics of Finance,
in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 8, pages 431-552
- Gary Gorton & Andrew Winton, 2002. "Financial Intermediation," NBER Working Papers 8928, National Bureau of Economic Research, Inc.
- Gary Gorton & Andrew Winton, 2002. "Financial Intermediation," Center for Financial Institutions Working Papers 02-28, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Douglass C. North, 2005.
"Introduction to Understanding the Process of Economic Change
[Understanding the Process of Economic Change]," Introductory Chapters, Princeton University Press.
- Levine, Ross, 2005.
"Finance and Growth: Theory and Evidence,"
Handbook of Economic Growth,
in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934
- Allen N. Berger & Gregory F. Udell, 1998.
"The economics of small business finance: the roles of private equity and debt markets in the financial growth cycle,"
Finance and Economics Discussion Series
1998-15, Board of Governors of the Federal Reserve System (U.S.).
- N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
- Wurgler, Jeffrey, 2000.
"Financial markets and the allocation of capital,"
Journal of Financial Economics,
Elsevier, vol. 58(1-2), pages 187-214.
- Pierre Garrouste & Stavros Iaonnides, 2001. "Evolution and Path-Dependency in Economic Ideas: Past and Present," Post-Print halshs-00274526, HAL.
- Goodhart, C A E, 1987. "Why Do Banks Need a Central Bank?," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 75-89, March.
- Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
- Paul Wachtel, 2003. "How much do we really know about growth and finance?," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 33-47.
- Stiglitz,Joseph & Greenwald,Bruce, 2003.
"Towards a New Paradigm in Monetary Economics,"
Cambridge University Press, number 9780521810340, June.
- Salvatore Capasso, 2004.
"Financial Markets, Development and Economic Growth: Tales of Informational Asymmetries,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 18, pages 267-292, 07.
- Salvatore Capasso, 2003. "Financial Markets Development And Economic Growth: Tales Of Informational Asymmetries," Working Papers 2_2003, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
- Alan S. Blinder & Joseph E. Stiglitz, 1983.
"Money, Credit Constraints, and Economic Activity,"
NBER Working Papers
1084, National Bureau of Economic Research, Inc.
- North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(04), pages 803-832, December.
- Richard Sylla, 2006. "Schumpeter Redux: A Review of Raghuram G. Rajan and Luigi Zingales's Saving Capitalism from the Capitalists," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 391-404, June.
- Giovanni Ferri, 2006. "Essay Review on Raghuram G. Rajan and Luigi Zingales (2003), Saving Capitalism from the Capitalists, Random House, New York," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 35(2), pages 219-225, 07.
- Leopoldo Fergusson, 2006. "Institutions for Financial Development: What are they and where do they come from?," Journal of Economic Surveys, Wiley Blackwell, vol. 20(1), pages 27-70, 02.
- King, Robert G. & Levine, Ross, 1993.
"Finance and growth : Schumpeter might be right,"
Policy Research Working Paper Series
1083, The World Bank.
- Joseph E. Stiglitz, 2002.
"Information and the Change in the Paradigm in Economics,"
American Economic Review,
American Economic Association, vol. 92(3), pages 460-501, June.
- Stiglitz, Joseph E., 2001. "Information and the Change in the Paradigm in Economics," Nobel Prize in Economics documents 2001-8, Nobel Prize Committee.
- Luigi Zingales & Raghuram G. Rajan, 2003.
"Banks and Markets: The Changing Character of European Finance,"
NBER Working Papers
9595, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G & Zingales, Luigi, 2003. "Banks and Markets: the Changing Character of European Finance," CEPR Discussion Papers 3865, C.E.P.R. Discussion Papers.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages F54-F72, February.
When requesting a correction, please mention this item's handle: RePEc:ins:quaeco:qf06013. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Segreteria Dipartimento)
If references are entirely missing, you can add them using this form.