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

Isabel Schnabel and Körner, Tobias
Authors registered in the RePEc Author Service: Tobias Körner

No 8138, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: Economic growth; Financial development; Political institutions; Public banks; Quality of governance (search for similar items in EconPapers)
JEL-codes: G18 G21 O16 (search for similar items in EconPapers)
Date: 2010-12
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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