Alexander Gershenkron

Bio: Alexander Gershenkron is an academic researcher. The author has contributed to research in topics: Perspective (graphical) & Backwardness. The author has an hindex of 1, co-authored 1 publications receiving 600 citations.

Financial development and economic growth : views and agenda

Abstract: The author argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth. There is evidence that the financial development level is a good predictor of future rates of economic growth, capital accumulation, and technological change. Moreover, cross-country, case-style, industry level and firm-level analysis document extensive periods when financial development crucially affects the speed and pattern of economic development. The author explains what the financial system does and how it affects, and is affected by, economic growth. Theory suggests that financial instruments, markets and institutions arise to mitigate the effects of information and transaction costs. A growing literature shows that differences in how well financial systems reduce information and transaction costs influence savings rates, investment decisions, technological innovation, and long-run growth rates. A less developed theoretical literature shows how changes in economic activity can influence financial systems. The author advocates a functional approach to understanding the role of financial systems in economic growth. This approach focuses on the ties between growth and the quality of the functions provided by the financial systems. The author discourages a narrow focus on one financial instrument, or a particular institution. Instead, the author addresses the more comprehensive question: What is the relationship between financial structure and the functioning of the financial system?

Was prometheus unbound by chance? Risk diversification and growth

Abstract: This paper offers a theory of development that links the degree of market incompleteness to capital accumulation and growth. At early stages of development, the presence projects limits the degree of risk spreading (diversification) that the economy can achieve. The desire to avoid highly risky investments slows down capital accumulation, and the inability to diversify idiosyncratic risk introduces a large amount of uncertainty in the growth process. The typical development pattern will consist of a lengthy period of “primitive accumulation” with highly variable output, followed by takeoff and financial deepening and, finally, steady growth. “Lucky” countries will spend relatively less time in the primitive accumulation stage and develop faster. Although all agents are price takers and there are no technological spillovers, the decentralized equilibrium is inefficient because individuals do not take into account their impact on others' diversification opportunities. We also show that our results generalize to economies with international capital flows.

Ministry of Education and Science of the Russian Federation

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On the Costs of a Bank-Centered Financial System: Evidence from the Changing Main Bank Relations in Japan

Abstract: We examine the effects of bank-firm relationships on firm performance in Japan. When access to capital markets is limited, close bank-firm ties increase the availability of capital to borrowing firms, but do not lead to higher profitability or growth. The cost of capital of firms with close bank ties is higher than that of their peers. This indicates that most of the benefits from these relationships are appropriated by the banks. Finally, the slow growth rates of bank clients suggest that banks discourage firms from investing in risky, profitable projects. However, liberalization of financial markets reduces the banks' market power. THE CLOSE RELATIONSHIP BETWEEN manufacturing firms and financial institutions in Japan has recently been at the center of the debate on the appropriate financial system for the reforming economies of Eastern Europe. As opposed to the Anglo-Saxon separation of finance and industry, long-term ties between main banks and their client firms (involving bank loans, bank equity holding, and some bank-appointed personnel), which are common in Japan and Germany, have often been described as a growth-oriented financial system that could serve the needs of developing and reformed economiies better than anonymous capital markets modeled after the Arnerican and British financial systems. The claim that close ties between investmentoriented banks and industrial firms could help overcome the difficulties of "relative backwardness" dates back to Gerschenkron (1962) who investigates European development. Rosovsky (1961) applies Gerschenkron's framework to the analysis of Japanese growth. More recently, Aoki, Patrick, and Sheard (1994), Hoshi, Kashyap, and Loveman (1994), and Teranishi (1993), among others, portray the close ties between finance and industry in Japan as an important factor in the international competitiveness of modern Japanese

The Economics of Growth

Abstract: A comprehensive, rigorous, and up-to-date introduction to growth economics that presents all the major growth paradigms and shows how they can be used to analyze the growth process and growth policy design.This comprehensive introduction to economic growth presents the main facts and puzzles about growth, proposes simple methods and models needed to explain these facts, acquaints the reader with the most recent theoretical and empirical developments, and provides tools with which to analyze policy design. The treatment of growth theory is fully accessible to students with a background no more advanced than elementary calculus and probability theory; the reader need not master all the subtleties of dynamic programming and stochastic processes to learn what is essential about such issues as cross-country convergence, the effects of financial development on growth, and the consequences of globalization. The book, which grew out of courses taught by the authors at Harvard and Brown universities, can be used both by advanced undergraduate and graduate students, and as a reference for professional economists in government or international financial organizations.The Economics of Growth first presents the main growth paradigms: the neoclassical model, the AK model, Romer's product variety model, and the Schumpeterian model. The text then builds on the main paradigms to shed light on the dynamic process of growth and development, discussing such topics as club convergence, directed technical change, the transition from Malthusian stagnation to sustained growth, general purpose technologies, and the recent debate over institutions versus human capital as the primary factor in cross-country income differences. Finally, the book focuses on growth policies?analyzing the effects of liberalizing market competition and entry, education policy, trade liberalization, environmental and resource constraints, and stabilization policy?and the methodology of growth policy design. All chapters include literature reviews and problem sets. An appendix covers basic concepts of econometrics.