Financial Intermediation and Employment

Manoj Pant, Prabal Roy Chowdhury () and Gurbachan Singh ()
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Gurbachan Singh: Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi

Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers from Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India

Abstract: In our model, there are entrepreneurs and other agents. The latter have labour and capital, but no entrepreneurship. They are employed for a wage, or they are self-employed (which is inefficient). If they are employed for a wage, they invest their capital in financial assets. Otherwise, they take up self-employment, which requires capital and leaves little scope for buying financial assets. It can then be shown that investment in financial assets and wage employment are positively correlated. The model helps explain why a small financial system and low wage employment are observed in less developed countries that have high cost of financial intermediation.

Pages: 29 pages
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Citations: View citations in EconPapers (2)

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Journal Article: Financial Intermediation and Employment (2009)
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