When Do State-owned Banks Hamper Economic Growth?

• http://www.financial-economics.vwl.uni-mainz.de/Dateien/Koerner_Schnabel_2009.pdf

Tobias Körner (Ruhr Graduate School in Economics), Isabel Schnabel (University of Mainz, CEPR, and MPI Bonn):

Abstract

In an influential paper, La Porta, Lopez-De-Silanes and Shleifer (2002) have documented a strong and negative relationship between state ownership of banks in 1970 and subsequent growth of per capita GDP. We show that this relationship does not hold for all countries. Instead the effect appears to depend on a country's stage of financial development and on the quality of political institutions, as measured by various political and governance indicators. In fact, the negative impact of state ownership on growth is fading when a country's financial system develops. Moreover, the weaker are the political institutions, the stronger is the negative impact. In highly developed countries, we do not find an effect of state ownership on growth at all. This calls into question the broad policy implications that have been drawn from the results by La Porta et al. (2002).

JEL-Classification: O16, G18, G21.

14.04.2010 | Forschungsarbeit