nep-mfd New Economics Papers
on Microfinance and Financial Development
Issue of 2004‒12‒20
three papers chosen by
Iman van Lelyveld
De Nederlandsche Bank

  1. Bank Mergers and Crime: The Real and Sociial Effects of Credit Market Competition By Mark J. Garmaise; Tobias J. Moskowitz
  2. Finance, Firm Size, and Growth By Thorsten Beck; Asli Demirguc-Kunt; Luc Laeven; Ross Levine
  3. Finance, Inequality, and Poverty: Cross-Country Evidence By Thorsten Beck; Asli Demirgu-Kunt; Ross Levine

  1. By: Mark J. Garmaise; Tobias J. Moskowitz
    Abstract: Using a unique sample of commercial loans and mergers between large banks, we provide microlevel (within-county) evidence linking credit conditions to economic development and find a spillover effect on crime. Neighborhoods that experienced more bank mergers are subjected to higher interest rates, diminished local construction, lower prices, an influx of poorer households, and higher property crime in subsequent years. The elasticity of property crime with respect to merger-induced banking concentration is 0.18. We show that these results are not likely due to reverse causation, and confirm the central findings using state branching deregulation to instrument for bank competition.
    JEL: G3
    Date: 2004–12
  2. By: Thorsten Beck; Asli Demirguc-Kunt; Luc Laeven; Ross Levine
    Abstract: This paper examines whether financial development boosts the growth of small firms more than large firms and hence provides information on the mechanisms through which financial development fosters aggregate economic growth. We define an industry's technological firm size as the firm size implied by industry specific production technologies, including capital intensities and scale economies. Using cross-industry, cross-country data, the results indicate that financial development exerts a disproportionately large effect on the growth of industries that are technologically more dependent on small firms. This suggests that financial development accelerates economic growth by removing growth constraints on small firms and also implies that financial development has sectoral as well as aggregate growth ramifications.
    JEL: G2 L11 L25 O1
    Date: 2004–12
  3. By: Thorsten Beck; Asli Demirgu-Kunt; Ross Levine
    Abstract: While substantial research finds that financial development boosts overall economic growth, we study whether financial development disproportionately raises the incomes of the poor and alleviates poverty. Using a broad cross-country sample, we distinguish among competing theoretical predictions about the impact of financial development on changes in income distribution and poverty alleviation. We find that financial development reduces income inequality by disproportionately boosting the incomes of the poor. Countries with better-developed financial intermediaries experience faster declines in measures of both poverty and income inequality. These results are robust to controlling for other country characteristics and potential reverse causality.
    JEL: O11 O16 G00
    Date: 2004–12

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