Public Ownership of Banks and Economic Growth – The Role of Heterogeneity

Tobias Körner and Isabel Schnabel

No 2010_41, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: In an influential paper, La Porta, Lopez-De-Silanes and Shleifer (2002) argued that public ownership of banks is associated with lower GDP growth. We show that this relationship does not hold for all countries, but depends on a country’s financial development and political institutions. Public ownership is harmful only if a country has low financial development and low institutional quality. The negative impact of public ownership on growth fades quickly as the financial and political system develops. In highly developed countries, we find no or even positive effects. Policy conclusions for individual countries are likely to be misleading if such heterogeneity is ignored.

Keywords: Public banks; economic growth; financial development; quality of governance; political institutions (search for similar items in EconPapers)
JEL-codes: G18 G21 O16 (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Public Ownership of Banks and Economic Growth - The Role of Heterogeneity (2010)
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