CoChat
Sign Up
Cited by 63Monetary Policy and Economic ImpactEconomic Growth and ProductivityEconomic Growth and Development

Finance, Growth, and Inequality

Open access
Levine, Ross·2021·IMF Working Papers
DOI 10.5089/9781513583365.001
Open this paper in CoChat — free accountOpen PDF

Abstract

Finance and growth emerged as a distinct field of economics during the last three decades as economists integrated the fields of finance and economic growth and then explored the ramifications of the functioning of financial systems on economic growth, income distribution, and poverty. In this paper, I review theoretical and empirical research on the connections between the operation of the financial system and economic growth and inequality. While subject to ample qualifications, the preponderance of evidence suggests that (1) financial development—both the development of banks and stock markets—spurs economic growth and (2) better functioning financial systems foster growth primarily by improving resource allocation and technological change, not by increasing saving rates. Some research also suggests that financial development expands economic opportunities and tightens income distribution, primarily by boosting the incomes of the poor. This work implies that financial development fosters growth by expanding opportunities. Finally, and more tentatively, financial innovation—improvements in the ability of financial systems to ameliorate information and transaction costs—may be necessary for sustaining growth.

AI snapshot

Written from the paper’s full text.

TL;DR

This IMF working paper reviews three decades of theory and evidence on how financial system functioning relates to growth, inequality, and poverty. It concludes that better-functioning banks and markets generally support growth through improved allocation and innovation, and tentatively that finance can broaden opportunity and reduce inequality, while financial innovation may be needed to sustain growth.

Key findings

  • Across cross-country, panel, instrumental-variable, time-series, industry, firm, and within-country studies, better-developed banks and stock markets are linked to faster growth; King and Levine’s 77-country 1960–1989 work found initial private credit predicted later GDP, capital, and productivity growth, and a Bolivia counterfactual implied about 0.4 percentage points faster annual growth and roughly 13% higher 1990 per capita GDP.
  • Finance appears to raise growth mainly by improving resource allocation and technological change rather than by raising saving rates; Rajan and Zingales’ 36 industries and 42 countries found externally dependent industries grew disproportionately faster in financially developed economies, with Machinery versus Beverages in Italy versus the Philippines estimated at 1.3 percentage points faster growth (actual difference 3.4).
  • On distribution, Beck, Demirgüç-Kunt, and Levine’s cross-country work (72 countries for inequality, 1960–2005; developing countries for poverty, 1980–2005) indicates financial development lowers Gini inequality, raises bottom-quintile income growth, and reduces extreme poverty below $2/day; U.S. branch deregulation is reported to explain 60% of within-sample variation in inequality and to cut the white–black male wage gap from 14% to 11% (about 20%).
  • Financial innovation may be necessary to maintain growth as production becomes more complex; however, evidence on finance–inequality and nonlinear finance–growth effects is mixed, with some studies finding thresholds (e.g., private credit at 100% of GDP) and others rejecting them.

Methods

  • Narrative literature review synthesizing theoretical models and empirical studies, not a new empirical analysis.
  • Covers cross-country growth regressions, instrumental-variable, panel GMM, time-series, cross-country/cross-industry, cross-firm, and within-country designs; cited samples include 77 countries 1960–1989/1960–1995, 42 countries 1976–1993, 36 industries and 42 countries, 72 countries 1960–2005, and U.S. states.
  • Main analysis is qualitative synthesis organized around financial functions (information production, governance, risk management, savings mobilization, exchange), growth empirics, inequality/poverty, and financial innovation.

Limitations

  • Stated: the literature does not yet definitively answer whether finance causes growth and how; financial development is often measured by the size of one component (e.g., banking) rather than the services theory emphasizes; results are not unanimous.
  • Stated: finance–inequality findings conflict, with some studies finding inequality reduction and others finding increases or conditional effects; causes of nonlinear finance–growth patterns remain unexplained; more work is needed on financial innovation, stability, growth, and distribution.
  • Evident from text: as a review, it relies on selected cited studies and does not conduct a systematic meta-analysis or new causal identification; the evidence base is heterogeneous in measures, samples, frequency, and methods.

Model-written summary. Check it against the paper before relying on it.

Integrity signals

Registry

Crossref · 10.5089/9781513583365.001

Cites

374 of 374 references verified0 citation errors · 0 not checkable

Statistics

Nothing to recompute.

Claims the paper makes

22 of 215 cited sources checked · 15 supported · 1 flagged · accuracy not yet measured

  • Premisecitation

    Laeven, Levine, and Michalopoulos (2015) and Beck, Chen, Lin, and Song (2016) find that financial innovation raises the pace of economic growth.

    “Using different measures of financial innovation and a panel econometric framework, they find that financial innovation boosts the rate of economic growth.”
    Quote in the paperSubstantial claim1 of 2 sources checked
    • cites Laeven, Levine, and Michalopoulos (2015) source
    • cites Beck, Chen, Lin, and Song (2016) source

      Section 4.3 (page unavailable) explicitly says the authors do not find that countries or industries grow faster with higher financial innovation. They instead find that innovation helps them exploit growth opportunities, producing growth effects relative to overall country or industry growth. That contradicts the unqualified attribution that they found innovation boosts the economic growth rate. (LLM, conf=0.88)

      Checked by a reasoning model — may be wrong.

      Experimental — accuracy not yet measured
  • Interpretationreasoning

    Financial intermediaries may arise to monitor firms and managers.

    “Given these barriers to corporate governance by small and large shareholders, financial intermediaries may arise to monitor firms and managers.”
    Quote in the paperSubstantial claim1 of 2 sources checked
    • cites Diamond (1984) source
    • cites Boyd and Prescott (1986) source

      The paper’s opening summary says financial intermediaries arise endogenously and produce information about investment projects. The Introduction also discusses monitoring borrowers, but attributes that model to Diamond. Boyd and Prescott do not establish that intermediaries arise to monitor firms’ managers in response to barriers to shareholder governance. (LLM, conf=0.84)

      Experimental — accuracy not yet measured
  • Interpretationcitation

    Existing managers often take actions-poison pills-that deter takeovers and weaken the market as an effective disciplining device.

    “Third, existing managers often take actions -poison pills -that deter takeovers and weaken the market as an effective disciplining device”
    Quote in the paperNot a substantial claim1 of 3 sources checked
    • cites DeAngelo and Rice 1983

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Jensen 1993 source

      The Conclusion says opposition from corporate managers helped shut down the market for corporate control through court decisions, state antitakeover amendments, and financing restrictions. It also describes that market as a source of discipline. Our copy does not say managers used poison pills specifically to deter takeovers. (LLM, conf=0.84)

      Experimental — accuracy not yet measured
    • cites Allen and Gale 2000

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Premisecitation

    The exogenous component of financial development is positively associated with growth.

    “These studies find that the exogenous component of financial development is positively associated with growth.”
    Quote in the paperSubstantial claim1 of 2 sources checked
    • cites Levine et al. (2000) source
    • cites Beck et al. (2000) source
  • Premisecitation

    Legal systems that protect shareholder rights boost firm growth.

    “boosting firm growth.”
    Quote in the paperSubstantial claim1 of 1 sources checked
    • cites Brown, Martinsson, and Petersen (2013) source

      The paper reports a positive relation between stock-market access and small-firm growth in value added and productivity (p. 5). It also finds that stronger legal investor protections are associated with greater use of external equity (A. Law and Firm Stock Issues, p. 22). Together these support an indirect link, but the claim presents legal protections as directly boosting firm growth generally, beyond the small-firm result reported here. (LLM, conf=0.84)

      Experimental — accuracy not yet measured
  • Classified as probably not a substantial claim. 47
  • May combine two claims. 71

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationcitation

    If well-developed stock markets facilitate takeovers and underperforming managers are fired following takeovers, better stock markets can promote better corporate control by easing takeovers of poorly-managed firms.

    “Similarly, if well-developed stock markets facilitate takeovers and underperforming managers are fired following takeovers, better stock markets can promote better corporate control by easing takeovers of poorly-managed firms”
    Quote in the paperNot a substantial claim1 of 2 sources checked
    • cites Scharfstein, 1988

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Stein, 1988 source

      The Introduction (p. 2) describes the argument that takeover threats discipline managers who risk being ousted for failing shareholders. It does not establish that better-developed stock markets ease takeovers of poorly managed firms; the paper also examines potential harms from takeover pressure rather than concluding that easier takeovers improve corporate control. (LLM, conf=0.87)

      Experimental — accuracy not yet measured

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Financial development explains the speed with which countries converge to their steady-state output levels, not steady-state growth.

    “Aghion, Howitt, and Mayer-Foulkes (2005) challenge that conclusion and stress that financial development explains the speed with which countries convergence to their steady-state values.”
    Quote in the paperNot a substantial claim1 of 1 sources checked
    • cites Aghion, Howitt, and Mayer-Foulkes (2005) source

      Section III.B says financial development increases the likelihood of convergence to the frontier growth rate, and the discussion of Figure VI relates the estimated convergence parameter to private credit. But the claim’s exclusion of steady-state growth is too broad: the section on divergence in growth rate says that, for countries with sufficiently low financial development, steady-state growth increases with financial development. Page numbers are unavailable for these passages. (LLM, conf=0.88)

      Experimental — accuracy not yet measured

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Jauch and Watzka (2016) and Haan and Sturm (2017) find that measures of financial development are associated with increases in income inequality.

    “Using panel data, Jauch and Watzka (2016) and ©International Monetary Fund.Not for Redistribution Haan and Sturm (2017) find that measures of financial development are associated with increases in income inequality.”
    Quote in the paperNot a substantial claim2 of 2 sources checked
    • cites Jauch and Watzka (2016) source
    • cites Haan and Sturm (2017) source

  • May combine two claims.

    Findingnone given

    Economies with better functioning banks and stock markets grow faster, and simultaneity bias does not appear to drive this conclusion.

    “The bulk of existing research suggests that (1) economies with better functioning banks and stock markets grow faster, and simultaneity bias does not seem to drive this conclusion”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Under conditions of indivisibilities in human capital investment and imperfect capital markets, financial development may relax financing constraints, improve the efficiency of human capital investment, and foster long-run economic growth.

    “Under these conditions, financial development may relax financing constraints, improve the efficiency of human capital investment, and foster long-run economic growth.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

    Interpretationnone given

    Some research indicates that financial development broadens economic opportunities and tightens income distribution, chiefly by raising the incomes of the poor.

    “Some research also suggests that financial development expands economic opportunities and tightens income distribution, primarily by boosting the incomes of the poor.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationcitation

    Financial intermediaries may reduce the costs of acquiring and processing information and improve resource allocation.

    “Financial intermediaries may reduce the costs of acquiring and processing information and improve resource allocation”
    Quote in the paperSubstantial claim0 of 3 sources checked
    • cites Allen 1990 source
    • cites Bhattacharya and Pfeiderer 1985

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Boyd and Prescott 1986 source

      Not checked in the free run.

  • Classified as probably not a substantial claim.

    Interpretationreasoning

    Theory suggests that financial innovation might be necessary for sustained long-run growth.

    “For example, theory suggests that financial innovation might be necessary for sustained long-run growth.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim. May combine two claims.

    Interpretationreasoning

    An absence of financial innovation will lead to slower growth; financial innovation is necessary to maintain the same growth rate.

    “From this perspective, an absence of financial innovation will lead to slower growth; that is, financial innovation is necessary to maintain the same growth rate.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    A recent IMF/World Bank report explains how the creation of new financial technologies may foster inclusive growth that reduces inequality.

    “Indeed, a recent report by the International Monetary Fund / World Bank (2019) explains how the creation of new financial technologies may foster inclusive growth that reduces inequality.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites International Monetary Fund / World Bank (2019)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

    Interpretationnone given

    Financial innovation, meaning improvements in financial systems' capacity to reduce information and transaction costs, may be necessary for sustaining growth.

    “Finally, and more tentatively, financial innovation-improvements in the ability of financial systems to ameliorate information and transaction costs-may be necessary for sustaining growth.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationcitation

    With larger, more liquid markets, it is easier for an agent who has acquired information to disguise private information and make money by trading, thereby boosting incentives to produce valuable information with positive implications for capital allocation.

    “With larger, more liquid markets, it is easier for an agent who has acquired information to disguise this private information and make money by trading in the market, thereby boosting incentives to produce this valuable information with positive implications for capital allocation”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Merton, 1987

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationnone given

    Financial development can increase the relative demand for low-skilled workers, reducing income inequality and poverty.

    “Furthermore, financial development can increase the relative demand for low-skilled workers, reducing income inequality and poverty.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S2 (checkable). May combine two claims.

    Interpretationreasoning

    The literature does not yet provide a definitive answer to whether finance causes growth and, if so, how.

    “Given these shortcomings, I assert that the literature does not yet provide a definitive answer to the questions: Does finance cause growth, and if it does, how?”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    The emerging bulk of empirical research tentatively indicates that improvements in financial contracts, markets, and intermediaries expand economic opportunities, reduce persistent inequality, and tighten income distribution.

    “Subject to many caveats, the emerging bulk of empirical research points tentatively toward the conclusion that improvements in financial contracts, markets, and intermediaries expand economic opportunities, reduce persistent inequality, and tighten income distribution.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    Highly concentrated ownership can distort corporate decisions in ways that curtail innovation, encourage rent-seeking, and stymie growth.

    “Thus, highly concentrated ownership can distort corporate decisions in ways that curtail innovation, encourage rentseeking, and stymie growth.”
    Quote in the paperSubstantial claim0 of 3 sources checked
    • cites La Porta et al., 1999

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Morck et al., 2000 source
    • cites Faccio and Lang, 2002

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Premisecitation

    The British financial system was better at mobilizing savings from different individuals.

    “the British financial system was better at mobilizing savings from different individuals”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Bagehot (1873)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S4 (based).

    Interpretationnone given

    If investors cannot trade, diversify, and manage the risks associated with high expected return endeavors, they will be less likely to fund such activities with potentially material, adverse repercussions on economic growth.

    “If investors cannot trade, diversity, and manage the risks associated with high expected return endeavors, they will be less likely to fund such activities with potentially material, adverse repercussions on economic growth.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    Britain's better savings mobilization allowed it to invest more effectively in high-return but indivisible projects.

    “(b) invest in high-return but indivisible projects, i.e., projects that required a large, minimum injection of capital.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Bagehot (1873)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    Firm production processes are long-term, uncertain, and subject to shocks.

    “Holmstrom and Tirole (1998) note that firm production processes are long-term, uncertain, and subject to shocks.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Holmstrom and Tirole (1998) source

  • May combine two claims.

    Premisecitation

    Money lowers transaction costs, permits greater specialization, and fosters technological innovation.

    “Smith (1776) focused on the role of one particular financial instrument, money, in lowering transaction costs, permitting greater specialization, and fostering technological innovation”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Smith (1776)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

    Interpretationnone given

    Banks may develop in anticipation of future economic growth whose mainsprings lie elsewhere.

    “It may be that banks develop in anticipation of future economic growth where the mainsprings of that growth lie elsewhere.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    Division of labor (specialization) is the principal factor underlying productivity improvements.

    “He argued that division of labor --specialization --is the principal factor underlying productivity improvements.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Smith (1776)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    The ability to borrow in the future is influenced negatively by the likelihood of a recession and positively by the level of financial development.

    “which is influenced negatively by the likelihood of experiencing a recession and positively by the level of financial development.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Aghion, Angeletos, Banerjee, and Manova (2004)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Interpretationcitation

    Public trading of shares in stock markets that efficiently reflect information about firms allows owners to link managerial compensation to stock prices and better align the interests of managers with those of shareholders.

    “For example, public trading of shares in stock markets that efficiently reflect information about firms allows owners to link managerial compensation to stock prices and better align the interests of managers with those of shareholders”
    Quote in the paperNot a substantial claim0 of 2 sources checked
    • cites Diamond and Verrecchia, 1982 source
    • cites Jensen and Murphy, 1990 source

  • May combine two claims.

    Interpretationcitation

    Banks can reduce liquidity risk and foster growth.

    “Banks can also reduce liquidity risk and foster growth.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Bencivenga and Smith (1991) source

  • May combine two claims.

    Interpretationcitation

    Banks and stock markets provide different services to the economy, as each measure enters positively and significantly in growth regressions.

    “Critically, these findings suggest that banks and markets provide different services to the economy, as each measure enters positively and significantly.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Levine and Zervos (1998) source

  • Classified as probably not a substantial claim.

    Premisecitation

    A major difference between England and poorer countries was that the British financial system could mobilize resources for immense works.

    “Bagehot (1873, p. 3-4) argued that a major difference between England and poorer countries was that the British financial system could mobilize resources for”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Bagehot (1873)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    If Bolivia had the average value of financial development in 1960, holding other things constant, it would have grown about 0.4 percent faster per annum, and by 1990 real per capita GDP would have been about 13 percent larger.

    “They suggest that if Bolivia had the average value of financial development in 1960, then, holding other things constant, it would have grown about 0.4 percent faster per annum, so that by 1990 real per capita GDP would have been about 13 percent larger than it was.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Levine et al. (2000) source

  • Probably not a substantial claim: may not pass S1 (asserted), S3 (load-bearing), S4 (based). May combine two claims.

    Interpretationnone given

    The delegated monitor economizes on aggregate monitoring costs and eliminates the free-rider problem since the intermediary does the monitoring for all investors.

    “The”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationcitation

    Banks provide insurance to savers against liquidity risk while simultaneously facilitating long-run investments in high-return projects by providing demand deposits and choosing an appropriate mixture of liquid and illiquid investments.

    “Banks provide insurance to savers against liquidity risk while simultaneously facilitating long-run investments in high-return projects by providing demand deposits and choosing an appropriate mixture of liquid and illiquid investments.”
    Quote in the paperSubstantial claim
    • The authors state this as an assumption: It is prohibitively costly to verify whether another individual has received a shock.

  • May combine two claims.

    Premisecitation

    Mobilizing savings involves costly collection of savings from different individuals and overcoming informational asymmetries that make savers comfortable relinquishing control.

    “Mobilizing savings, however, involves the costly process of collecting savings from different individuals and overcoming the informational asymmetries associated with making savers feel comfortable in relinquishing control of their savings.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Bagehot (1873)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationnone given

    Liquidity risk can shape savings and investment decisions, with potentially large ramifications on economic growth.

    “Liquidity risk can also shape savings and investment decisions, with potentially large ramifications on economic growth.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationcitation

    The emergence of equity markets or banks can reduce liquidity risk and spur economic growth.

    “For example, Levine (1991) shows how the emergence of equity markets or banks can reduce liquidity risk and spur economic growth.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Levine (1991) source

  • May combine two claims.

    Premisecitation

    Financial development boosts patents and R&D expenditures.

    “Furthermore, Ang (2011) and Madsen and Ang (2016) show that financial development boosts patents and R&D expenditures.”
    Quote in the paperNot a substantial claim0 of 2 sources checked
    • cites Ang (2011)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Madsen and Ang (2016)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Premisecitation

    Steady-state growth requires continual improvements in the functioning of financial systems.

    “They develop a model and provide empirical evidence suggesting that steady-state growth requires continual improvements in the functioning of financial systems.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Levine, and Michalopoulos (2015)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Premisecitation

    The growth effect of a marginal increase in Private Credit is larger for countries in the middle of the financial development distribution.

    “The effect is larger for countries in the middle of the financial development distribution.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Rioja and Valev (2004b)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Short-run surges in bank lending can signal the onset of financial crises and economic stagnation.

    “Loayza and Ranciere (2002) argue that short-run surges in bank lending can signal the onset of financial crises and economic stagnation.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Loayza and Ranciere (2002)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Study design and conductnone given

    Panel frameworks allow instrumenting all regressors, not just financial development, and provide more precise estimates of the finance-growth relationship.

    “A third advantage of the panel framework is that it allows for instrumenting all regressors, not just for financial development, and provides more precise estimates of the finance-growth relationship.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    Bank concentration promotes the growth of naturally heavy users of external finance.

    “Cetorelli and Gambera (2001) show that bank concentration promotes the growth of naturally heavy users of external finance”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Cetorelli and Gambera (2001) source

  • Classified as probably not a substantial claim.

    Study design and conductnone given

    Moving from cross-country to panel data allows exploiting time-series and cross-sectional variation.

    “One advantage of moving from a cross-country to a panel setting is exploiting the time-series and cross-sectional variation in the data.”
    Quote in the paperSubstantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    There is no threshold beyond which more financial development slows growth, based on data from emerging and advanced economies.

    “They reject the view that there is a threshold beyond which more financial development slows growth using data from emerging and advanced economies.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Botev, Égert, and Jawadi (2019) source

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Bond market development exerts a positive, causal impact on economic growth.

    “Fink, Haiss, and Hristoforova (2003) and Pradhan, Arvin, Bennett, Nair, and Hall (2016) use Granger causality tests and conclude that bond market development exerts a positive, causal impact on economic growth.”
    Quote in the paperNot a substantial claim0 of 2 sources checked
    • cites Fink, Haiss, and Hristoforova (2003)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Pradhan, Arvin, Bennett, Nair, and Hall (2016) source

  • Probably not a substantial claim: may not pass S2 (checkable), S4 (based).

    Interpretationnone given

    Measuring financial development-the degree to which financial systems screen, govern, provide risk management, mobilize savings, and ease transactions-is challenging.

    “First, it is challenging to measure financial development-the degree to which financial systems effectively screen, govern, provide risk management tools, mobilize savings, and ease transactions.”
    Quote in the paperNot a substantial claim

  • Classified as probably not a substantial claim.

    Premisecitation

    The relationship between growth and Private Credit may be nonlinear.

    “Furthermore, Rioja and Valev (2004b) and Arcand, Berkes, and Panizza (2015) find that the relationship between growth and Private Credit may be nonlinear.”
    Quote in the paperSubstantial claim0 of 2 sources checked
    • cites Rioja and Valev (2004b)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Arcand, Berkes, and Panizza (2015) source

      Not checked in the free run.

  • Classified as probably not a substantial claim.

    Premisecitation

    Market concentration is not necessarily a good proxy for competition.

    “However, Claessens and Laeven (2004) argue that market concentration is not necessarily a good proxy for competition.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Claessens and Laeven (2004)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Premisecitation

    A critical function of the financial system is to screen and fund positive net present value projects.

    “They stress that a critical function of the financial system is to screen and fund positive net present value projects.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Rajan and Zingales (1998)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Premisecitation

    A positive long-run relationship between financial development and growth co-exists with a generally negative short-run link.

    “They find a positive long-run relationship between financial development and growth co-exists with a generally negative short-run link.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Loayza and Ranciere (2002)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Premisecitation

    Constructing reliable empirical measures of financial development is difficult.

    “Benhabib and Spiegel (2001) stress the difficulties in constructing reliable empirical measures of financial development.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Benhabib and Spiegel (2001)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Premisecitation

    Financial depth starts to slow growth when Private Credit reaches 100% of GDP.

    “Arcand, Berkes, and Panizza (2015) find that financial depth starts to slow growth when Private Credit reaches 100% of GDP.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Arcand, Berkes, and Panizza (2015) source

      Not checked in the free run.

  • May combine two claims.

    Interpretationcitation

    There is a strong link between financial development, technological innovation, and the rate of economic growth.

    “Their findings suggest a strong link between financial development, technological innovation, and the rate of economic growth.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Brown, Fazarri, and Petersen (2009)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S1 (asserted), S2 (checkable), S3 (load-bearing), S4 (based).

    Premisenone given

    Liquidity creation is one of the most important services that banks provide to the economy.

    “Theory advertises that liquidity creation is one of the most important services that banks provide to the economy.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisecitation

    Bank deregulation spurred new business creation, providing another mechanism through which financial development can foster economic growth.

    “Furthermore, Black and Strahan (2002) and Kerr and Nanda (2009) show that deregulation spurred new business creation, representing another mechanism through which financial development can foster economic growth.”
    Quote in the paperNot a substantial claim0 of 2 sources checked
    • cites Black and Strahan (2002)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Kerr and Nanda (2009) source

  • May combine two claims.

    Premisecitation

    Liberalizing intrastate branching and interstate banking restrictions tended to accelerate growth without boosting volatility.

    “Acharya, Imbs, and Sturgess (2011) discover that liberalizing intrastate branching and interstate banking restrictions tended to accelerate growth without boosting volatility.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Acharya, Imbs, and Sturgess (2011) source

  • May combine two claims.

    Interpretationreasoning

    When financial reforms spur competition and improve the quality of financial services offered to firms, this tends to reduce barriers to competition by younger private firms and spur more innovation.

    “Consistent with theories of finance and growth, when financial reforms spur competition and hence improve the quality of financial services offered to firms, this tends to reduce barriers to competition by younger, private firms and spurred more innovation.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    After the 1985 French deregulation that removed government intervention in bank lending and increased credit-market competition, banks bailed out poorly performing firms less often, charged them more for capital, and allocative efficiency across firms rose.

    “They find that after deregulation, banks bailed out poorly performing firms less frequently, increased the cost of ©International Monetary Fund.Not for Redistribution capital to poorly performing firms, and induced an increase in allocative efficiency across firms.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Bertrand, Schoar, and Thesmar (2004)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    The French deregulation lowered industry concentration ratios and increased firm entry and exit rates.

    “This lowered industry concentration ratios and boosted both entry and exit rates for firms.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Bertrand, Schoar, and Thesmar (2004)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationcitation

    According to these studies, finance exerts a disproportionately positive influence on lower-income individuals, not just accelerating growth that trickles down.

    “According to these studies, it is not just that finance accelerates economic growth, which trickles down to the poor; f inance exerts a disproportionately positive influence on lower-income individuals.”
    Quote in the paperSubstantial claim0 of 3 sources checked
    • cites Clarke, Xu, and Zho (2006)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Agnello and Sousa (2012) source
    • cites Hamori and Hashiguchi (2012) source

  • Probably not a substantial claim: may not pass S4 (based). May combine two claims.

    Interpretationreasoning

    Better-functioning financial systems that focus more on a person's ideas and abilities and less on family wealth and political connections when allocating credit simultaneously boost economic growth by improving capital allocation and expanding opportunities beyond the already rich and connected.

    “First, suppose that better-functioning financial systems focus more on a person's ideas and abilities and less on family wealth and political connections when allocating credit.In this case, better-functioning financial systems simultaneously boost economic growth by improving the efficiency of capital allocation and expanding economic opportunities beyond the already rich and connected.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing). May combine two claims.

    Premisecitation

    Bahmani-Oskooee and Zhang (2015) find that financial development reduced income inequality in ten out of 17 countries in their sample, but the effects lasted into the long run in only three cases.

    “Using timeseries techniques, Bahmani-Oskooee and Zhang (2015) find that financial development reduced income inequality in ten out of the 17 countries in their sample.Still, the effects lasted into the long run in only three cases.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Bahmani-Oskooee and Zhang (2015)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationreasoning

    Poorly functioning financial systems lead to a less efficient allocation of education, which contributes to the persistence of intergenerational inequality.

    “Thus, with poorly functioning financial systems, there is a less efficient allocation of education.This inefficiency contributes to the persistence of intergenerational inequality.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    Jeanneney and Kpodar (2011) note that financial development tends to increase financial instability, which can be especially detrimental to the poor.

    “They also note that financial development tends to increase financial instability, which can be especially detrimental to the poor.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Jeanneney and Kpodar (2011)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Interpretationreasoning

    To the extent that financial development allows economies to circumvent those nonconvexities and create a more inclusive investment environment, this would influence the dynamics of income distribution across generations.

    “To the extent that financial development allows economies to circumvent those nonconvexities and create a more inclusive investment environment, this would influence the dynamics of income distribution across generations.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    Greater access to finance leads to greater social efficiency and less intergenerational persistence of inequality.

    “social efficiency and less intergeneration persistence of inequality with greater access to finance.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Cihak and Sahay (2020) argue that financial reform policies that focus on providing financial services to more individuals and firms can reduce inequality.

    “Cihak and Sahay (2020) argue that financial reform policies that focus on providing financial services to more individuals and firms can reduce inequality.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Cihak and Sahay (2020)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    Financial intermediaries enjoy economies of scale in screening projects, but individuals must pay a fee to join them; as more individuals join, resource allocation improves and access to higher expected return investments expands.

    “Financial intermediaries enjoy economies of scale in screening projects, but individuals must pay a fee to join those financial intermediaries.As more individuals join the intermediary, this improves the efficiency of resource allocation and expands individuals' access to higher expected return investments.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Greenwood & Jovanovic (1990) source

  • May combine two claims.

    Interpretationcitation

    With perfect competition, owners that discriminate based on race, gender, religion, ethnicity, etc., will be more likely to go bankrupt, so competition tends to reduce inefficiencies, including inefficiencies from bigotry.

    “For example, with perfect competition, owners that discriminate based on race, gender, religion, ethnicity, etc., will be more likely to go bankrupt.Thus, competition tends to reduce inefficiencies, including inefficiencies from bigotry.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Interpretationreasoning

    By intensifying product market competition, financial development can increase the costs to firms from discriminating based on social connections, race, religion, ethnicity, etc., and thus can foster efficiency and expand opportunities.

    “Furthermore, by intensifying product market competition, financial development can increase the costs to firms from discriminating based on social connections, race, religion, ethnicity, etc.Thus, by reducing discrimination based on non-productivity-related traits, financial development can foster efficiency and expand opportunities.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S4 (based).

    Interpretationreasoning

    If there are nonconvexities associated with investing in or engaging in high expected return activities, higher income and wealthier families might have access to higher expected return investments, perpetuating and even magnifying income and wealth inequalities over time.

    “In particular, if there are nonconvexities associated with investing in or engaging in high expected return activities, then higher income and wealthier families might have access to higher expected return investments, perpetuating and even magnifying income and wealth inequalities over time.”
    Quote in the paperNot a substantial claim
    • The authors state this as an assumption: There are nonconvexities associated with investing in or engaging in high expected return activities.

  • May combine two claims.

    Premisecitation

    At low levels of economic development, few people join financial intermediaries because fixed costs are high relative to income, so growth is slow and income distribution is equal.

    “At low levels of economic development, few people join intermediaries because of the high fixed costs relative to income, so growth is slow and income distribution is equal.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Townsend and Ueda 2006

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S4 (based).

    Premisenone given

    From the mid-1970s to the mid-1990s, individual U.S. states removed regulatory restrictions on the opening of bank branches within their boundaries.

    “From the mid-1970s to the mid-1990s, individual U.S. states removed regulatory restrictions on the opening of bank branches within their boundaries.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    The effect of a lower cost of capital on the distribution of wages and income inequality is theoretically ambiguous and depends largely on whether capital accumulation raises relative demand for lower-income or higher-income workers.

    “The ramifications of a lower cost of capital on the distributio n o f wages and, therefore, on income inequality are theoretically ambiguous.It largely depends on the degree to which capital accumulation increases the relative demand for lower-income or higher-income workers.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    Over time, as some people join the financial intermediary and obtain greater returns, growth and income inequality increase.

    “Over time, some people join the financial intermediary and enjoy greater returns: growth and income inequality increase.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Townsend and Ueda 2006

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    In Brazil after 1889, industrial concentration fell and industrial production boomed.

    “Industrial concentration fell, and industrial production boomed.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Haber (1991, 1997)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationreasoning

    With better financial systems, human capital becomes more tightly linked to ability, and the economy attains the socially efficient allocation of schooling.

    “With better financial systems, human capital, h(i,t), becomes more tightly linked to ability, e(i,t), and the economy attains the socially efficient allocation of schooling, s(i,t).”
    Quote in the paperSubstantial claim
    • The authors state this as an assumption: Ability endowments and schooling are complementary inputs into human capital production, so the cross-partial derivative of human capital with respect to ability and schooling is positive.

  • Classified as probably not a substantial claim.

    Premisecitation

    Haber (1997) concludes that international differences in financial development significantly affected the rate of industrial expansion.

    “Haber (1997) concludes that (1) international differences in financial development significantly impacted the rate of industrial expansion”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Haber (1997) source

  • May combine two claims.

    Interpretationreasoning

    Finance can affect income distribution through its effects on the relative demand for more-skilled or less-skilled workers and on the competitiveness of labor and product markets.

    “Second, finance can also affect income distribution through its effects on (a) the relative demand for moreskilled or less-skilled workers and (b) the competitiveness of labor and product markets.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Wage rates can differ across individuals with the same human capital because of wage discrimination across dynasties, intensifying the intergenerational transmission of income inequality.

    “The wage rate can also differ across individuals with the same human capital due to wage discrimination across individuals from different dynasties, intensifying the intergenerational transmission of income inequality.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    By impeding talented but low-income individuals from becoming entrepreneurs, credit constraints lower overall economic efficiency and slow aggregate growth.

    “Furthermore, by impeding talented but lowincome individuals from becoming entrepreneurs, credit constraints lower the overall level of economic efficiency (Piketty 2000, p. 455), slowing aggregate growth.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Piketty 2000, p. 455

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationreasoning

    When financial systems function poorly, parental wealth constrains schooling, so schooling depends on prior assets and human capital depends on both ability and prior assets, implying greater persistence in income inequality across generations.

    “Even if ability tends to regress toward the mean, poorly functioning financial systems imply that parental wealth constrains schooling wealth.As a result, s(i,t) is a function of a(i,t-1) and h(i,t) = h[e(i,t), a(i,t-1)], implying greater persistence in income inequality across generations.”
    Quote in the paperSubstantial claim
    • The authors state this as an assumption: Ability endowments across dynasties are mean-reverting.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisecitation

    Kim and Lin (2011) and Law, Tan, and Azaman-Saini (2014) find that financial development only reduces inequality when countries have specific pre-existing conditions, such as sufficiently developed financial and governance institutions.

    “Kim and Lin (2011) and Law, Tan, and Azaman-Saini (2014) find that financial development only reduces inequality when countries have specific pre-existing conditions, e.g., sufficiently developed financial and governance institutions.”
    Quote in the paperNot a substantial claim0 of 2 sources checked
    • cites Kim and Lin (2011) source
    • cites Law, Tan, and Azaman-Saini (2014)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    The decline in industrial concentration and the increase in economic growth were weaker in Mexico than in Brazil.

    “As a result, the decline in concentration and the increase in economic growth were much weaker in Mexico than in Brazil.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Haber (1991, 1997)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    Eventually, when many people can afford to join the intermediary, growth is maximized and inequality is reduced.

    “Eventually, many people can afford to join the intermediary, which maximizes growth and reduces inequality.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Townsend and Ueda 2006

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    Greenwood & Jovanovic (1990) examine a model in which financial development shapes who can access higher expected-return projects, with material costs to screening such projects.

    “Greenwood & Jovanovic (1990) examine the dynamics of growth and inequality in a model in which financial development shapes who can access higher expected-return projects.In the model, there are material costs to screening higher expected returns projects.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Greenwood & Jovanovic (1990) source

  • May combine two claims.

    Interpretationreasoning

    Financial development can lower the cost of capital to promising firms by improving capital allocation and possibly increasing capital accumulation.

    “Financial development improves the efficiency with which capital is allocated acro ss f irms an d may also increase capital accumulation.Thus, financial development can lower the cost of capital to promising firms.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S3 (load-bearing), S4 (based).

    Interpretationreasoning

    If financial development lowers barriers to entry and creates a more dynamic, competitive labor market, this will tend to boost wages.

    “For example, if f inancial development lowers barriers to the entry of new firms and creates a more dynamic, competitive labor market, this will tend to boost wages.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisecitation

    Sun and Yannelis (2016) show that financial development lowered the costs to students from obtaining loans, boosting education.

    “Similarly, Sun and Yannelis (2016) show that financial development lowered the costs to students from obtaining loans, boosting education.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Sun and Yannelis (2016)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    Levine and Rubinstein (2013) find that financial reforms that improve the operation of financial systems tend to reduce high school drop rates and increase college enrollment rates among students from lower-income households.

    “For example, Levine and Rubinstein (2013) find that financial reforms that improve the operation of financial systems tend to reduce high school drop rates and increase college enrollment rates among students from lower-income households.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Levine and Rubinstein (2013)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    A country's starting Private Credit level in 1960 forecasts its growth in real GDP per capita, real physical capital per capita, and productivity over the following three decades.

    “They show that the initial level of Private Credit in 1960 predicts (a) real per capita GDP growth, (b) real physical capital per capita growth, and (c) productivity growth over the next thirty years.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites KL

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisereasoning

    Venture capitalists usually took an active role, joining boards and assisting with management and financial difficulties.

    “They generally became active investors, taking seats on the board of directors and helping to solve managerial and financial problems.”
    Quote in the paperNot a substantial claim

  • Probably not a substantial claim: may not pass S4 (based).

    Premisenone given

    Legal, regulatory, and policy frameworks vary substantially between economies and across periods.

    “laws, regulations, and policies differ markedly across economies and over time”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Interpretationreasoning

    Supplying these functions can affect how resources are allocated and how the economy grows.

    “the provision of these functions may influence resource allocation and economic growth.”
    Quote in the paperSubstantial claim

  • Probably not a substantial claim: may not pass S1 (asserted). May combine two claims.

    Interpretationcitation

    Financial innovation is required to support technological advances and maintain long-run economic growth.

    “Third, some research suggests that financial innovation might be necessary for sustained economic growth.”
    Quote in the paperNot a substantial claim0 of 1 sources checked
    • cites Laeven, Levine, and Michalopoulos (2015) source

  • May combine two claims.

    Premisecitation

    Demirguc-Kunt and Maksimovic (1998) and Beck et al. (2001) report that banking development and stock market liquidity are positively linked to excess firm growth, meaning growth above what internal funds alone would allow.

    “Demirguc-Kunt and Maksimovic (1998) and Beck, Demirguc-Kunt, Levine, and Maksimovic (2001) find that banking system development and stock market liquidity are positively associated with excess firm growth, which is the growth rate beyond what firms could achieve from internal funds.”
    Quote in the paperSubstantial claim0 of 2 sources checked
    • cites Demirguc-Kunt and Maksimovic (1998) source
    • cites Beck, Demirguc-Kunt, Levine, and Maksimovic (2001)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Probably not a substantial claim: may not pass S3 (load-bearing).

    Premisenone given

    An investment by a knowledgeable pharmaceutical company in a biotech firm can prompt other investors to put money into that firm.

    “when an expert pharmaceutical company invests in a biotech firm, this encourages others to invest in the firm.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisecitation

    The U.S. bank branch deregulations intensified competition and triggered improvements in banking services, reducing loan interest rates, raising deposit rates, lowering overhead costs, spurring better screening and monitoring, and reducing bad loans.

    “The reforms intensified competition and triggered improvements in banking services, reducing interest rates on loans, raising them on deposits, lowering overhead costs, spurring the development of better techniques for screening and monitoring firms, and reducing the proportion of bad loans on the books of banks (Hubbard andPalia 1995, Jayaratne andStrahan 1998).”
    Quote in the paperSubstantial claim0 of 2 sources checked
    • cites Hubbard and Palia 1995

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

    • cites Jayaratne and Strahan 1998 source

  • May combine two claims.

    Study design and conductreasoning

    The turnover ratio is not a direct gauge of trading costs or of whether securities can be sold at quoted prices, but it captures trading volume relative to market size and thus indicates trading frictions.

    “Although this ratio does not directly measure trading costs or the ability to sell securities at posted prices, it does measure trading relative to the size of the market and hence reflects trading and other frictions.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisecitation

    Before a state deregulates, a white man with identical observable characteristics to a black man earns 14% more; after deregulation, the race gap falls to 11%.

    “Before a state deregulates, a white man with identical observable characteristics to a black man earns 14% more.After a state deregulates, the race gap falls to 11%.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Levine, Levkov, and Yona Rubinstein (2007)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Study design and conductcitation

    The negative relationship between branch deregulation and inequality is robust to using different income distribution measures, examining different components of income, controlling for many time-varying state characteristics, and conditioning on state and year fixed effects.

    “The negative relationship between branch deregulation and inequality is robust to using different income distribution measures, examining different components of income, controlling for many time-varying state characteristics, and conditioning on state and year fixed effects.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Beck, Levine, and Levkov (2010) source

  • May combine two claims.

    Premisereasoning

    New venture capital firms emerged to evaluate entrepreneurs and offer technical, managerial, and financial guidance to young high-tech companies.

    “Venture capital firms arose to screen entrepreneurs and provide technical, managerial, and financial advice to new high-tech firms.”
    Quote in the paperNot a substantial claim

  • May combine two claims.

    Premisecitation

    KL also find strong, positive, and statistically significant links between average Private Credit from 1960 to 1989 and growth in real GDP per capita, real physical capital per capita, and productivity over that period.

    “KL also discover large, positive, and statistically significant relationships between the average level of Private Credit over the 1960-1989 period and (a) real per capita GDP growth, (b) real physical capital per capita growth, and (c) productivity growth over the same period.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites KL

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Premisecitation

    Laeven, Levine, and Michalopoulos (2015) suggest that financial innovation is essential for growth.

    “In considering the role of financial innovation, Laeven, Levine, and Michalopoulos (2015) take a step back from recent crises and offer a broader, long-run consideration of financial development and suggest that financial innovation is essential for growth.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Laeven, Levine, and Michalopoulos (2015) source

  • Classified as probably not a substantial claim. May combine two claims.

    Study design and conductcitation

    Jayaratne and Strahan (1996, 1998) argue that the driving forces behind these financial reforms were largely independent of state-specific changes in growth, income inequality, and labor market conditions, making the reforms plausibly exogenous sources of variation in financial system functioning across states.

    “Jayaratne andStrahan (1996, 1998) argue that the driving forces behind these financial reforms were largely independent of state-specific changes in growth, income inequality, and labor market conditions.That is, the reforms represent plausibly exogenous sources of variation in the functioning of financial systems across states.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Jayaratne and Strahan (1996, 1998)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    Specialized financiers and investment banks emerged to mobilize capital from individuals, screen and invest in railroads, and monitor the use of those investments, often by serving on boards of directors.

    “Specialized financiers and investment banks emerged to mobilize capital from individuals, screen and invest in railroads, and monitor the use of those investments, often by serving on the boards of directors (Carosso, 1970).”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Carosso, 1970

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Interpretationcitation

    These findings suggest that improving the financial system reduces discrimination, expanding the opportunities of groups that have been disproportionately stuck at the bottom of the income distribution.

    “These findings suggest that improving the financial system reduces discrimination, expanding the opportunities of groups that have been disproportionately stuck at the bottom of the income distribution.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Levine, Levkov, and Yona Rubinstein (2007)

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    The novelty and complexity of railroads made preexisting financial systems ineffective at screening and monitoring them, and reliance on local finance restricted growth.

    “The novelty and complexity of railroads made preexisting financial systems ineffective at screening and monitoring them.Although prominent local investors with close ties to those operating the railroad were the primary sources of capital for railroads during the early decades of this new technology, this reliance on local finance restricted growth.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Carosso, 1970

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • May combine two claims.

    Premisecitation

    Deregulation reduces income inequality by disproportionately boosting the incomes of the poor, not by hurting the rich.

    “Furthermore, deregulation reduces income inequality by disproportionately boosting the incomes of the poor, not by hurting the rich.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Beck, Levine, and Levkov (2010) source

  • May combine two claims.

    Premisecitation

    Investment banks used expertise and reputation to mobilize funds from wealthy investors, evaluate railroad proposals, allocate capital, and govern railroad operations for investors.

    “Based on their ©International Monetary Fund.Not for Redistribution expertise and reputation, these investment banks mobilized funds from wealthy investors, evaluated proposals from railroads, allocated capital, and governed the operations of railroad companies for investors.”
    Quote in the paperSubstantial claim0 of 1 sources checked
    • cites Carosso, 1970

      Couldn’t be matched to a paper in Crossref, so it can’t be checked.

  • Classified as probably not a substantial claim.

    Interpretationnone given

    Certain financial innovations may make particular institutions or markets unstable, with effects that spread across the economy.

    “some financial innovations could destabilize specific financial institutions or markets that could reverberate throughout the economy.”
    Quote in the paperSubstantial claim

  • May combine two claims.

    Premisereasoning

    Large pharmaceutical companies have many scientists and engineers on staff or in regular contact, close ties to those who deliver medical products to customers, and lawyers knowledgeable about drug regulations.

    “Pharmaceutical companies (a) employ (or are in regular contact with) a large assortment of scientists and engineers, (b) have close connections with those delivering medical products to customers, and (c) employ lawyers well versed in drug regulations.”
    Quote in the paperSubstantial claim
110 of 110

  • The authors state this as an assumption.

    Many entrepreneurs solicit capital.

    “Assuming that many entrepreneurs solicit capital and that capital is scarce”

  • The authors state this as an assumption.

    Capital is scarce.

    “Assuming that many entrepreneurs solicit capital and that capital is scarce”

  • The authors state this as an assumption.

    It is prohibitively costly to verify whether another individual has received a shock.

    “The model assumes that it is prohibitively costly to verify whether another individual has received a shock.”

  • The authors state this as an assumption.

    Financial systems that allocate more credit to private firms are more engaged in screening, corporate control, risk management, savings mobilization, and transaction facilitation than systems that fund fewer private firms.

    “The assumption underlying this measure is that financial systems that allocate more credit to private firms are more engaged in screening firms, exerting corporate control over the firms that they fund, providing risk management services, mobilizing savings, and facilitating transactions than financial systems that play less of role in funding private firms.”

  • The authors state this as an assumption.

    U.S. financial markets are relatively frictionless.

    “RZ assume that (1) financial markets in the U.S. are relatively frictionless”

  • The authors state this as an assumption.

    In a frictionless financial system, technological factors influence the degree to which firms in an industry use external finance.

    “(2) in a frictionless financial system, technological factors influence the degree to which firms in an industry use external finance”

  • The authors state this as an assumption.

    The technological factors influencing external finance are constant (or reasonably constant) across countries.

    “(3) the technological factors influencing external finance are constant (or reasonably constant) across countries.”

  • The authors state this as an assumption.

    U.S. financial markets are relatively frictionless, so firm sizes within U.S. industries reflect technological factors rather than financial frictions.

    “As in RZ, they assume that U.S. financial markets are relatively frictionless so that the sizes of firms within industries in the U.S. reflect technological factors, not financial system frictions.”

  • The authors state this as an assumption.

    There are adjustment costs to R&D.

    “They also assume that there are adjustment costs to R&D.”

  • The authors state this as an assumption.

    Ability endowments and schooling are complementary inputs into human capital production, so the cross-partial derivative of human capital with respect to ability and schooling is positive.

    “Further, assume that ability endowments and schooling are complementary inputs into human capital production, so that ∂ 2 h/∂e∂s > 0.”

  • The authors state this as an assumption.

    Ability endowments across dynasties are mean-reverting.

    “If one assumes that ability endowments across dynasties are mean-reverting, then ability can be specified as e(i,t) = ρe(i,t-1) + ε(i,t), where 0 ≤ ρ < 1, and ε(i,t) is the random component of individual ability.”

  • The authors state this as an assumption.

    High expected return investments require large capital injections, and there are large information and transaction costs associated with mobilizing savings from many small investors to undertake such investments.

    “Suppose high expected return investments require large capital injections, and there are large information and transaction costs associated with mobilizing savings from many small investors to undertake such investments.”

  • The authors state this as an assumption.

    There are nonconvexities associated with investing in or engaging in high expected return activities.

    “In particular, if there are nonconvexities associated with investing in or engaging in high expected return activities”
13 of 13

Cites

Flagged first, then by citations

Cited by

Sorted by citations

Related

Authors
Levine, R.
Affiliations
University of California, Berkeley (US)
Corresponding author
Levine, Ross
ORCID
Levine, Ross
Venue
IMF Working Papers
Publisher
International Monetary Fund (IMF)
Published
2021-06
Volume
2021
Issue
164
Pages
1
ISSN
1018-5941 (ISSN-L)
DOI
10.5089/9781513583365.001
OpenAlex
W4239293429
Cited by
62
References
353
Citations by year
2026: 6 · 2025: 15 · 2024: 14 · 2023: 18 · 2022: 8 · 2021: 1
FWCI
15.50
Type
journal article
Language
en
Open access
Locations
IMF Working Paper (publishedVersion)
Funders
Foreign, Commonwealth and Development Office (60925)
Topics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
  • Physical Sciences › Computer Science › Information Systems › Economic Growth and Development
Keywords
financial development, economic growth, income inequality, financial system, banks, stock market, resource allocation, technological change, savings rate, poverty, income distribution, financial innovation, information costs, transaction costs, economic opportunities

About these checks

Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.

Claims read by deepseek-v4.1-flash under definition version 3 (extract-v3) on 2026-09-28.

Classified by jev-1.13-20260917 (gold-guideline-v0.2) on 2026-09-28.

Cited sources are checked by gpt-6-sol.

Statistics and arithmetic are recomputed, not judged.

Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.

What counts as a claim ›How we measure confidence ›How we check this ›

Are you an author, or do you see a problem with this page? Request a review