Financial deepening and innovation: The role of political institutions
Chun-Yu Ho (),
Hao Shi and
World Development, 2018, vol. 109, issue C, 1-13
This study investigates the effects of financial deepening on innovation for various democratic levels of political institutions using panel data from 74 countries spanning 1970–2010. Our results show that banking market deepening is associated with increased innovation only when political institutions are sufficiently democratic. In contrast, the enhancing effect of stock market deepening on innovation requires a lower level of political democracy. Further, we find that increasing the state's openness and competitiveness in the executive recruitment of leaders is the main channel through which political democratization promotes the role of banking and stock markets for financing innovation. Our results are robust to the use of the instrumental variable approach; alternative measures for financial deepening, democracy and innovation input; long-differenced variables; and alternative specifications.
Keywords: Innovation; Financial development; Political institutions (search for similar items in EconPapers)
JEL-codes: E02 G15 O15 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:109:y:2018:i:c:p:1-13
Access Statistics for this article
World Development is currently edited by O. T. Coomes
More articles in World Development from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().