nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2017‒09‒24
three papers chosen by
Georg Man

  1. No sympathy for the devil!: Policy priorities to overcome the middle-income trap in Latin America By Ángel Melguizo; Sebastián Nieto-Parra; José Ramón Perea; Jaime Ariel Perez
  2. The Origins of Financial Development: How the African Slave Trade Continues to Influence Modern Finance By Ross Levine; Chen Lin; Wensi Xie
  3. The Second Era of Globalization is Not Yet Over: An Historical Perspective By Michael D. Bordo

  1. By: Ángel Melguizo; Sebastián Nieto-Parra; José Ramón Perea; Jaime Ariel Perez
    Abstract: The empirical literature on development has labelled as “middle-income trap” (MIT) the fact that many developing economies struggle to adjust to new sources of growth after reaching middle-income levels. For Latin America and the Caribbean, this is an especially challenging scenario, as only Chile, Trinidad and Tobago, and Uruguay have become high-income economies in the last six decades while several other LAC countries, already middle-income as early as 1950, stayed in that income range. This paper analyses empirically the main policy areas explaining the MIT, based on the experiences of 76 emerging economies and OECD countries, comparing those which evaded it and those which stayed there since the 1950s. Based on more than 200 000 estimations using a linear discriminant analysis, we identify institutional, social and economic features that help characterise policy priorities to overcome the middle-income trap. Furthermore, using the Synthetic Control Method, we present for selected Latin American countries their main policy gaps according to their unique characteristics.
    Keywords: Latin America, middle-income trap, policy, prioritisation
    JEL: E6 O1 O20 O40
    Date: 2017–09–19
  2. By: Ross Levine; Chen Lin; Wensi Xie
    Abstract: We assess how the African slave trade—which had enduring effects on social cohesion—continues to influence financial systems. After showing that the intensity with which people were enslaved and exported from Africa during the 1400 – 1900 period helps account for overall financial development, household access to credit, and firm access to finance, we evaluate three potential mechanisms linking the slave trade to modern finance—information sharing institutions, trust in financial institutions, and the quality of legal institutions. We discover that the slave trade is strongly, negatively related to the information sharing and trust mechanisms but not to the legal mechanism.
    JEL: G21 N27 O16 O55
    Date: 2017–09
  3. By: Michael D. Bordo
    Abstract: The recent rise of populist anti-globalization political movements has led to concerns that the current wave of globalization that goes back to the 1870s may end in turmoil just like the first wave which ended after World War I. It is too soon to tell. The decline and then levelling off of trade and capital flows in recent years reflects the drastic decline in global real income during the Great Recession. Other factors at work include the slowing down in the growth rate of China and the reversal of the extended international supply chains developed in the 1990s, as well as increased financial regulation across the world after the crisis. This suggests either a pause in the pace of integration or more likely a slowing down, rather than a reversal.
    JEL: N1
    Date: 2017–09

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