Land Distribution and Financial System Development

Dietrich Vollrath and Lennart Erickson

No 2007/083, IMF Working Papers from International Monetary Fund

Abstract: Research on credit markets from developing economies, as well as work on the origin of institutions in general, has suggested that land inequality may play a role in determining financial development. In this paper we establish empirically that initial land inequality is a significant predictor of financial depth across countries, even while controlling for other predictors such as legal origin, ethnic fractionalization, and income inequality. To examine this relationship we have created a new measure of land distribution within countries that builds upon the work of Deininger and Squire (1998) by explicitly accounting for landlessness. In addition to being a significant predictor of financial development, land inequality is found to be uncorrelated with other fundamental characteristics of economies, suggesting its possible use in a wider range of research.

Keywords: WP; land inequality; Lorenz curve; standard deviation; inequality measure (search for similar items in EconPapers)
Pages: 30
Date: 2007-04-01
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Citations: View citations in EconPapers (14)

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