NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Legal-Political Factors and the Historical Evolution of the Finance-Growth Link

Michael D. Bordo, Peter L. Rousseau

NBER Working Paper No. 12035
Issued in February 2006
NBER Program(s):   DAE   EFG   LE

Recent cross-country investigations of the role of institutional fundamentals such as the protection of property rights in promoting financial development have extended a literature that has for decades maintained that financial factors can affect real outcomes. In this paper we pursue this new direction by considering relationships between finance, growth, legal origin, and political environment in a historical cross-section of 17 countries covering the period from 1880 to 1997. We find that relationships between a county's legal origin (i.e., English, French, German, or Scandinavian) and financial development are roughly consistent with earlier findings but are not persistent. At the same time, political variables such as proportional representation election systems, frequent elections, universal female suffrage, and infrequent revolutions or coups seem linked to larger financial sectors and higher conditional rates of economic growth. Despite the explanatory power of some of our measures of the deeper "fundamentals," however, a significant part of the growth-enhancing role of financial development remains unexplained by them.

download in pdf format
   (199 K)

email paper

This paper is available as PDF (199 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w12035

Published: Bordo, Michael D. and Peter L. Rousseau. "Legal-Political Factors and the Historical Evolution of the Finance-Growth Link." European Review of Economic History 10, 3 (December 2006): 421 - 444.

Users who downloaded this paper also downloaded these:
Obstfeld w14691 International Finance and Growth in Developing Countries: What Have We Learned?
Levine w10766 Finance and Growth: Theory and Evidence
Rousseau w9333 Historical Perspectives on Financial Development and Economic Growth
Beck, Demirguc-Kunt, Laeven, and Levine w10983 Finance, Firm Size, and Growth
Bordo and Rousseau w17024 Historical Evidence on the Finance-Trade-Growth Nexus
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us