Financial Development, Growth, and the Distribution of Income

Jeremy Greenwood and Boyan Jovanovic ()

No 3189, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A paradigm is presented where both the extent of financial intermediation and the rate of economic growth are endogenously determined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement costly financial structures. Thus, financial intermediation and economic growth are inextricably linked in accord with the Goldsmith-McKinnon-Shaw view on economic development. The model also generates a development cycle reminiscent of the Kuznets hypothesis. In particular, in the transi tion from a primitive slowgrowing economy to a developed fast-growing one, a nation passes through a stage where the distribution of wealth across the rich and poor widens.

Date: 1989-12
Note: EFG
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Citations: View citations in EconPapers (23)

Published as Journal of Political Economy, Vol. 98, No. 5, Pt. 1, pp. 1076-1107, (October 1990).

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Related works:
Journal Article: Financial Development, Growth, and the Distribution of Income (1990)
Working Paper: Financial Development, Growth, and the Distribution of Income (1990)
Working Paper: FINANCIAL DEVELOPMENT, GROWTH, AND THE DISTRIBUTION OF INCOME (1990)
Working Paper: FINANCIAL DEVELOPMENT, GROWTH, AND THE DISTRIBUTION OF INCOME (1988)
Working Paper: FINANCIAL DEVELOPMENT, GROWTH, AND THE DISTRIBUTION OF INCOME (1988)
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