Essay
More Bankers, More Growth? Evidence from OECD Countries
The authors thank Agnès Bénassy‐Quéré, Andrew Clark, Jézabel Couppey‐Soubeyran and Valérie Mignon, as well as the referees for helpful comments. This work was carried out while the authors were affiliated to the CEPII. The usual disclaimer applies.
Abstract
We re‐examine empirically the finance–growth relationship. We argue that financial deepening should not only be assessed via the familiar measures of financial activity output—the volume of credit—but also through its inputs—for example, the relative number of employees in the financial industry—or the efficiency of the financial‐intermediation process. The latter is measured in this paper by the ratio of credit volume to the number of financial‐sector employees. We compare these measures using the econometric approach recommended by Roodman (2009). Overall, we fail to find a positive relationship between financial deepening and economic growth in OECD countries over the last 40 years.
