Financial Development, Growth, and the Distribution of Income-英文文献.pdf

Financial Development, Growth, and the Distribution of Income Jeremy Greenwood Federal ReserveBank of Minneapolis and Universityof WesternOntario Boyan Jovanovic New YorkUniversity A paradigm is presented in which both the extent of financial inter- mediation and the rate of economic growth are endogenously deter- mined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement costly financial structures. Thus financial intermediation and economic growth are inextricably linked in accord with the Goldsmith-McKinnon-Shaw view on eco- nomic development. The model also generates a development cycle reminiscent of the Kuznets hypothesis. In particular, in the transi- tion from a primitive slow-growing economy to a developed fast- growing one, a nation passes through a stage in which the distribu- tion of wealth across the rich and poor widens. I. Introduction Two themes pervade the growth and development literature. The first is Kuznetss (1955) hypothesis on the relationship between eco- nomic growth and the distribution of income. On the basis of some- This paper has benefited enormously from the unusually detailed criticism of Robert Townsend, Neil Wallace, and two anonymous referees; we are in their debt. Comments from Robert Barro, James Kahn, Patrick Kehoe, Ariel Pakes, and Kenneth Rogoff are also gratefully acknowledged. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Re- serv