Job Growth and Finance : Are Some Financial Institutions Better Suited to Early Stages of Development Than Others?
This paper combines firm-level data from 89 countries with updated country-level data on financial structure, and uses two estimation approaches. It finds that in low-income countries, labor growth is swifter in countries with a higher level of pri...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111114114234 http://hdl.handle.net/10986/3648 |
| Summary: | This paper combines firm-level data from
89 countries with updated country-level data on financial
structure, and uses two estimation approaches. It finds that
in low-income countries, labor growth is swifter in
countries with a higher level of private credit/gross
domestic product; the positive effect of bank credit is
especially pronounced in industries that depend heavily on
external finance; and banking development is positively
associated with more physical and human capital investment.
These findings are consistent with predictions from new
structural economics. In high-income countries, labor growth
rates are increasing in the level of stock market
capitalization, which is also consistent with predictions
from new structural economics, although the analysis is
unable to provide evidence that the association is causal.
It finds no evidence that small-scale firms in low-income
countries benefit most from private credit market
development. Rather, the labor growth rates of larger,
capital-intensive firms increase more with the level of
private credit market development, a finding consistent with
the history-based political economy view that banking
systems in low-income countries serve the interests of the
elite, rather than providing broad-based access to financial services. |
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