THE CONTRIBUTION OF FINANCIAL DEVELOPMENT TO FORMALIZATION THROUGH ECONOMIC GROWTH: EVIDENCE FROM CROSS-COUNTRY DATA

Aeggarchat Sirisankanan and Papar Kananurak ()
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Aeggarchat Sirisankanan: Faculty of Accountancy and Management, Mahasarakham University, Khamriang Sub-District, Khatarawichai District, Mahasarakham 44150, Thailand
Papar Kananurak: Business Economics, Martin De Tours School of Management and Economics, Assumption University, Suvarnabhumi Campus, Samuthprakarn 10540, Thailand

Journal of Developmental Entrepreneurship (JDE), 2022, vol. 27, issue 03, 1-28

Abstract: The aim of the paper is to formulate empirical specification models to examine whether financial development stimulates economic growth and encourages formalization. Cross-country data analysis of 140 sample countries during the period from 2000 to 2018 were utilized, together with new indexes of financial development. The income decomposition method and the two-step estimation approach, together with the multiple linear regression with interactions effect, were employed as empirical methods. It was found that financial development can lower informal self-employment through economic growth. Financial development also contributes to economic growth. Therefore, development of financial markets and financial institutions should be an alternative policy to control informal employment.

Keywords: Financial development; economic growth; informal employment (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S1084946722500212

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