Finance and the Sources of Growth at Various Stages of Economic Development

  1. Felix Rioja1,
  2. Neven Valev2,†

Article first published online: 26 MAR 2007

DOI: 10.1093/ei/cbh049

Issue

Economic Inquiry

Economic Inquiry

Volume 42, Issue 1, pages 127–140, January 2004

Additional Information

How to Cite

Rioja, F. and Valev, N. (2004), Finance and the Sources of Growth at Various Stages of Economic Development. Economic Inquiry, 42: 127–140. doi: 10.1093/ei/cbh049

Author Information

  1. 1

    Rioja: Assistant Professor, Economics Department, AYSPS, Georgia State University, Atlanta, GA 30303–3084. Phone 1–404–651–0417, Fax 1–404–651–4985, E-mail prcfkr@langate.gsu.edu

  2. 2

    Valev: Assistant Professor, Economics Department, AYSPS, Georgia State University, Atlanta, GA 30303–3084. Phone 1–404–651–0418, Fax 1–404–651–4985, E-mail nvalev@gsu.edu

  1. †

    We would like to thank Piriya Pholpirul and Abel Embaye for their excellent research assistance.

Publication History

  1. Issue published online: 26 MAR 2007
  2. Article first published online: 26 MAR 2007

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This article studies the effects of financial development on the sources of growth in different groups of countries. Recent theoretical work shows that financial development may affect productivity and capital accumulation in different ways in industrial versus developing countries. This hypothesis is tested with panel data from 74 countries using GMM dynamic panel techniques. Results are consistent with the hypothesis: finance has a strong positive influence on productivity growth primarily in more developed economies. In less developed economies, the effect of finance on output growth occurs primarily through capital accumulation.

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