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Code and data files for "Quantifying the Impact of Financial Development on Economic Development"
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TLDR
In this article, a costly state verification model of financial intermediation is presented to address the question of how important financial development for economic development, and the model is calibrated to match facts about the U.S. economy, such as the intermediation spreads and the firm-size distributions for 1974 and 2004.Abstract:
How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as the intermediation spreads and the …firm-size distributions for 1974 and 2004. It is then used to study the international data using cross-country interest-rate spreads and per-capita GDPs. The analysis suggests a country like Uganda could increase its output by 116 percent if it could adopt the world’s best practice in the financial sector. Still, this amounts to only 29 percent of the gap between Uganda’s potential and actual output.read more
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Finance and Development: A Tale of Two Sectors †
TL;DR: This article developed a model co-determining aggregate total factor productivity (TFP), sectoral TFP, and scales across industrial sectors and found that financial frictions disproportionately affect TFP in tradable sectors where production requires larger costs.
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Finance and Misallocation: Evidence from Plant-Level Data
Virgiliu Midrigan,Daniel Yi Xu +1 more
TL;DR: In this article, the role of financial frictions in determining total factor productivity (TFP) was evaluated using producer-level data, and a model of establishment dynamics was proposed to reduce TFP through two channels: finance frictions distort entry and technology adoption decisions.
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The Causes and Costs of Misallocation
Diego Restuccia,Richard Rogerson +1 more
TL;DR: In this paper, the authors provide a perspective on three key questions: how important is misallocation, what are the causes of misallocating, and beyond the direct cost of lower contemporaneous output, are there additional costs associated with misallocations.
Posted Content
Has the U.S. Finance Industry Become Less Efficient
TL;DR: In this article, the authors use the neoclassical growth model to study financial intermediation in the U.S. over the past 140 years and find that the finance industry has become less efficient: the unit cost of intermediation is higher today than it was a century ago.
Posted Content
Identifying Constraints to Financial Inclusion and Their Impact on GDP and Inequality: A Structural Framework for Policy
TL;DR: The authors developed a micro-founded general equilibrium model with heterogeneous agents to identify pertinent constraints to financial inclusion and evaluate quantitatively the policy impacts of relaxing each of these constraints separately, and in combination, on GDP and inequality.
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Empirical studies on institutions, policies and economic development
Abstract: • A submitted manuscript is the version of the article upon submission and before peer-review. There can be important differences between the submitted version and the official published version of record. People interested in the research are advised to contact the author for the final version of the publication, or visit the DOI to the publisher's website. • The final author version and the galley proof are versions of the publication after peer review. • The final published version features the final layout of the paper including the volume, issue and page numbers.
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Long-Term Finance and Investment with Frictional Asset Markets
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TL;DR: In this paper, the authors characterize optimal policies involving subsidies to innovative and entrepreneurial activity, given both knowledge and search externalities, and show intermediation helps by financing more transactions with fewer assets and, more subtly, by ameliorating holdup problems.