Financial Development, Property Rights, and Growth


  • Stijn Claessens,

  • Luc Laeven

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    • Claessens is from the University of Amsterdam and CEPR and Laeven is from the World Bank. We are grateful to Richard Green (the editor) and an anonymous referee who helped us to substantially improve the paper. We thank Thorsten Beck, Sudipto Dasgupta, Charles Goodhart, Simon Johnson, Ross Levine, Inessa Love, Enrico Perotti, Sheridan Titman, and Chris Woodruff for helpful suggestions, and Ying Lin for excellent research assistance. We received helpful comments from seminar participants at Korea University, Universidad Argentina de la Empresa, London School of Economics, Stockholm School of Economics, University of Amsterdam, the 17th Annual Congress of the European Economic Association in Venice, and the Third Annual Conference on Financial Market Development in Emerging and Transition Economies at Hong Kong University of Science and Technology. We thank Raghu Rajan and Luigi Zingales for the use of their data, Ray Fisman and Inessa Love for providing their data on U.S. sectoral sales growth, and Walter Park for providing his index data on patent rights. The views expressed in this paper are those of the authors and do not necessarily represent those of the World Bank.


In countries with more secure property rights, firms might allocate resources better and consequentially grow faster as the returns on different types of assets are more protected against competitors' actions. Using data on sectoral value added for a large number of countries, we find evidence consistent with better property rights leading to higher growth through improved asset allocation. Quantitatively, the growth effect is as large as that of improved access to financing due to greater financial development. Our results are robust using various samples and specifications, including controlling for growth opportunities.