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Finance and economic opportunity

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  • Demirguc-Kunt, Asli
  • Levine, Ross

Abstract

An influential body of theoretical research and an emerging line of empirical work suggest that the operation of the formal financial system affects the degree to which economic opportunities are defined bytalent and initiative rather than by parental wealth and social connections. This paper discusses the theory of how financial markets influence economic opportunity and reviews recent empirical work on the relation between formal financial systems and poverty, income inequality, and economic opportunity. The authors consider recent efforts to measure the ability of households and small enterprises to access financial services, the impact of this access, and the mechanisms through which finance affects poverty and inequality. The authors argue that considerably more research is needed to identify which formal financial sector policies enhance the operation of the financial system in ways that expand the economic horizons of the economically disenfranchised.

Suggested Citation

  • Demirguc-Kunt, Asli & Levine, Ross, 2008. "Finance and economic opportunity," Policy Research Working Paper Series 4468, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4468
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    References listed on IDEAS

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    Cited by:

    1. Rao, B. Bhaskara & Hassan, Gazi Mainul, 2011. "A panel data analysis of the growth effects of remittances," Economic Modelling, Elsevier, vol. 28(1), pages 701-709.
    2. Kappel, Vivien, 2010. "The effects of financial development on income inequality and poverty," Proceedings of the German Development Economics Conference, Hannover 2010 25, Verein für Socialpolitik, Research Committee Development Economics.
    3. Ariel Fiszbein & Norbert Schady & Francisco H.G. Ferreira & Margaret Grosh & Niall Keleher & Pedro Olinto & Emmanuel Skoufias, 2009. "Conditional Cash Transfers : Reducing Present and Future Poverty," World Bank Publications, The World Bank, number 2597.
    4. Alejandra Campero & Karen Kaiser, 2013. "Access to Credit: Awareness and Use of Formal and Informal Credit Institutions," Working Papers 2013-07, Banco de México.
    5. Ivana Prica & Jelica Petrović VujaÄ ić, 2010. "Financial Services Liberalisation in Transition Countries and the Role of the WTO," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(4), pages 487-501, December.

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    Keywords

    Access to Finance; Banks&Banking Reform; Emerging Markets; Debt Markets;

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