 Does Local Financial Development Matter?Luigi Guiso, Paola Sapienza and Luigi Zingales Chapter Chapter 2 in The Banks and the Italian Economy, 2009, pp 31-66 from Springer Abstract: Abstract We study the effects of differences in local financial development within an integrated financial market. We construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we find that financial development enhances the probability an individual starts his own business, favors entry of new firms, increases competition, and promotes growth. As predicted by theory, these effects are weaker for larger firms, which can more easily raise funds outside of the local area. These effects are present even when we instrument our indicator with the structure of the local banking markets in 1936, which, because of regulatory reasons, affected the supply of credit in the following 50 years. Overall, the results suggest local financial development is an important determinant of the economic success of an area even in an environment where there are no frictions to capital movements. Keywords: Social Capital; Small Firm; Financial Development; Credit Market; Saving Bank (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-7908-2112-3_3 Ordering information: This item can be ordered from DOI: 10.1007/978-3-7908-2112-3_3 Access Statistics for this chapter More chapters in Springer Books from Springer |
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