EconPapers    
Economics at your fingertips  
 

Financial Intermediation and Structural Change: Theory and Evidence

David Jones, Corrado Di Maria and Simone Valente
Additional contact information
David Jones: University of East Anglia
Corrado Di Maria: University of East Anglia

No 2021-06, University of East Anglia School of Economics Working Paper Series from School of Economics, University of East Anglia, Norwich, UK.

Abstract: Does financial intermediation affect structural change? We investigate both theoretically and empirically whether financial development accelerates structural change during the post-industrialization phase where employment, value-added and expenditure shares change towards services and away from manufacturing. We build a dynamic general equilibrium model where firms and households face different types of intermediation costs, and structural change can be driven by mutually independent technology differences { exogenous productivity gaps or asymmetric factor elasticities { as well as by learning-by-doing. Besides suggesting a stronger impact of financial development when productivity is endogenous and services are labor-intensive, all the model specifications robustly predict that exogenous reductions in intermediation costs { e.g., deregulation shocks { accelerate the pace and extent of structural change. We test this prediction empirically by examining the effects of state by- state bank branching deregulation in the United States in the 1970-1990s period. Using a range of estimation techniques including synthetic control methods { pooled, augmented, and with staggered treatment { we show that bank branching deregulation accelerated the structural change that was already underway, i.e., services account for a greater share of output and employment than they would have in the absence of deregulation.

Keywords: Economic growth; structural change; nancial development; banking deregulation (search for similar items in EconPapers)
JEL-codes: G28 O14 O16 O41 O47 (search for similar items in EconPapers)
Date: 2021-07-29
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg and nep-isf
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://ueaeco.github.io/working-papers/papers/ueaeco/UEA-ECO-21-06.pdf main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaeco:2021-06

Ordering information: This working paper can be ordered from
Reception, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK

Access Statistics for this paper

More papers in University of East Anglia School of Economics Working Paper Series from School of Economics, University of East Anglia, Norwich, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Cara Liggins ().

 
Page updated 2023-01-24
Handle: RePEc:uea:ueaeco:2021-06