Is public expenditure productive

Legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. Levine, Loayza, and Beck evaluate: Whether the level of development of financial intermediaries exerts a casual influence on economic growth. Whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental-variable procedures and recent dynamic panel techniques, they find that development of financial intermediaries exerts a large causal impact on growth. The data also show that cross-country differences in legal and accounting systems help determine differences in financial development. Together, these findings suggest that legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the links between the financial system and economic growth. Thorsten Beck may be contacted at tbeck@worldbank.org.

Financial Intermediation and Growth: Causality and Causes

http://faculty.haas.berkeley.edu/ross_levine/Papers/2000_JME_Fin%20Int%20Growth%20Causality.pdf

Financial intermediation and growth: Causality and causes ☆

The ultimate ownership of Western European corporations

In the last decade, economists have produced a considerable body of research suggesting that the historical origin of a country's laws is highly correlated with a broad range of its legal rules and regulations, as well as with economic outcomes. We summarize this evidence and attempt a unified interpretation. We also address several objections to the empirical claim that legal origins matter. Finally, we assess the implications of this research for economic reform.

/pdf/the-economic-consequences-of-legal-origins-3phhiol1rf.pdf

The Economic Consequences of Legal Origins

On Education Level and Terms in Obtaining P2P Funding: New Evidence from China*

Greece's debt-to-GDP ratio is reaching unsustainable levels. But why should the debt load of such a small country cause such outsized tremors in global financial markets? Greek debt may be relative...

Greece's "Unpleasant Arithmetic" Containing the Threat to the Global Economy

Thrift deregulation and federal deposit insurance

There is growing and widespread interest among policy makers at all levels of government to promote entrepreneurial-friendly environments and entrepreneurship in terms of both self-employment and business ownership. The interest is motivated by a substantial body of research indicating that entrepreneurs spur the diffusion and implementation of innovative ideas, thereby creating new products, services, and markets. In addition, and perhaps more importantly, entrepreneurs contribute, whether through self-employment or the establishment of small businesses, to job formation and economic growth and development. Moreover, some consider self-employment a route out of poverty or off the unemployment rolls, especially for people encountering discrimination in the labor market. Self-employment can also be a way to increase one’s earnings. All these factors play a role in governmental efforts to foster entrepreneurship, in terms of both self-employment and business ownership, particularly in lowand moderate-income communities. Although evidence demonstrating the importance of entrepreneurship for increasing social welfare might be strong, the most important determinants of entrepreneurship are uncertain, and, therefore, so are policies that best support entrepreneurial activity. This uncertainty is twofold: it is not known fully why some individuals become entrepreneurs, while others become wage or salary workers; and factors most responsible for enabling or preventing a would-be entrepreneur from becoming self-employed or establishing a business are unclear. Researchers have studied both of these issues have been studied, but, so far, have failed to reach a consensus that provides a true roadmap to meaningful policy actions. The purpose of this paper is to explore several aspects of the various recent efforts made to understand better what works best at promoting entrepreneurship

Stumbling Blocks to Entrepreneurship in Low- and Moderate-Income Communities

Several studies have derived the optimal level of reserves for a bank under conditions of uncertainty. George Morrison [5], for example, determines the optimal reserve holdings for a bank by minimizing the expected costs associated with reserve management. Similarly, though providing a more comprehensive theory of the banking firm, Michael Klein [3] employs the expected costs of managing a bank's reserves to determine the optimal solution for the reserve variable. More recently, Ernst Baltensperger [1] also shows, among other things, that a bank can optimize its reserve holdings by minimizing the expected costs associated with reserve management. And, with regard to empirical work, John Makin [4] uses Edward Whalen's [6] model in an empirical study of optimal precautionary balances to be held by a bank. All of these studies contain expected cost functions which are misspecified, however. As a result, the optimal levels of reserves determined from these cost functions are incorrect. In view of the attention devoted to such models as well as the attempt to estimate such models, it is important to specify an alternative and more appropriate expected total cost function. The purpose of this paper is to specify a more general expected total cost function and then derive the optimal level of reserves. In the next section a summary of the ap-

James R. Barth

Papers

On Education Level and Terms in Obtaining P2P Funding: New Evidence from China*

Greece's "Unpleasant Arithmetic" Containing the Threat to the Global Economy

Thrift deregulation and federal deposit insurance

Stumbling Blocks to Entrepreneurship in Low- and Moderate-Income Communities

Optimal Reserve Management Reconsidered