Financial intermediation and growth : Causality and causes

The authors evaluate: a) whether the level of development of financial intermediaries exerts a casual influence on economic growth; and b) whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental-variable procedures and recent dynamic panel techniques, they find that development of financial intermediaries exerts a large causal impact on growth. The data also show that cross-country differences in legal and accounting systems help determine differences in financial development. Together, these findings suggest that legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth.Financial Intermediation,Decentralization,Economic Theory&Research,Public Health Promotion,Payment Systems&Infrastructure,Financial Intermediation,Financial Economics,Achieving Shared Growth,Economic Theory&Research,Governance Indicators

Investment Discrimination and the Proliferation of Preferential Trade Agreements

The proliferation of bilateral and regional trade agreements has arguably been the main change to the international trading system since the end of the Uruguay Round in the mid- 1990s. We argue that investment discrimination plays a major role in this development. Preferential trade agreements can lead to investment discrimination because of tariff differentials on intermediary products and as result of provisions that relax investment rules for the parties to the agreement. Excluded countries are sensitive to the costs that this investment discrimination imposes on domestic firms and react by signing a trade agreement that aims at leveling the playing field. We test our argument using a spatial econometric model and a newly compiled dataset that includes 166 countries and covers a period of 18 years (1990-2007). Our findings strongly support the argument that investment discrimination is a major driver of the proliferation of trade agreements

Finance and income inequality : test of alternative theories

Although theoretical models make distinct predictions about the relationship between financial sector development and income inequality, little empirical research has been conducted to compare their relative explanatory power. The authors examine the relation between financial intermediary development and income inequality in a panel data set of 91 countries for the period 1960-95. Their results provide evidence that inequality decreases as economies develop their financial intermediaries, consistent with the theoretical models in Galor and Zeira (1993) and Banerjee and Newman (1993). Moreover, consistent with the insight of Kuznets, the relation between the Gini coefficient and financial intermediary development appears to depend on the sectoral structure of the economy: a larger modern sector is associated with a smaller drop in the Gini coefficient for the same level of financial intermediary development. But there is no evidence of an inverted-U-shaped relation between financial sector development and income inequality, as suggested by Greenwood and Jovanovic (1990). The results are robust to controlling for biases introduced by simultaneity.Poverty Impact Evaluation,Environmental Economics&Policies,Health Economics&Finance,Economic Theory&Research,Payment Systems&Infrastructure,Inequality,Economic Theory&Research,Poverty Impact Evaluation,Environmental Economics&Policies,Health Economics&Finance

Trafficking of Migrant Workers from Romania: Issues of Labor and Sexual Exploitation

Part of a major research project on the forms of forced labor today developed by the ILO Special Action Programme to Combat Forced Labour (SAP-FL), this paper argues that trafficking for labor exploitation is an emerging issue in Europe and in particular in Romania. Features a detailed comparison of living conditions prior to the emergence of immigration, trafficking, and/or forced labor

Diaspora Philanthropy: Influences, Initiatives, and Issues

Analyzes the evolution of the interest in and practice of giving by diasporas in the United States to their countries of origin, organizations and models promoting it, influencing factors, and promising strategies and initiatives for increasing impact

Human trafficking and the effectiveness of asylum policies

We investigate the effects of restrictive asylum policies on the number and group composition of asylum seekers. We model the choices of refugees and traffickers about whether to migrate and to apply for asylum. Counter-intuitively, restrictive asylum policies do not lead to a reduction in the inflow of refugees or to a better selection of asylum seekers. Instead, we show that under conditions outside the control of policy makers these policies can increase the number of asylum claims and the number of refugees working in slave-like conditions and prevent some of those most in need of protection from accessing it. --Asylum policy,Illegal immigration,Human trafficking

Finance and democracy in Africa

The motivations of the Arab Spring and hitherto unanswered questions about some of its dynamics inspired this paper, which focuses on how democracy, polity and autocracy affect financial development dynamics of depth, efficiency, activity and size in Africa; contingent on religious-domination, income-levels and colonial-legacies. Findings could be summarized in the following. (1) Authoritarian regimes have a higher propensity to effect policies that favor the development of financial intermediary depth, activity and size. Democracy has important effects on the degree of competition for public offices but less significant effects in comparison with autocracy on policies towards financial development. (2) Christian-dominated countries have higher (lower) levels of financial intermediation efficiency (depth) than-Islam oriented countries. (3) Income-levels also matter in financial development as poor countries have a lower propensity to improve their financial dynamics than wealthy states. (4) On average English common-law countries have better democratic institutions that their French civil-law counterparts. (5) There is evidence of a U-shape relationship between national wealth and the level of democracy, with Low-income countries experiencing lower (higher) levels of democracy than Upper (Lower) middle income countries. As a policy implication, once democracy is initiated, it should be accelerated (to edge the appeals of authoritarian regimes) and reap the benefits of level and time hypotheses in financial development.Banking; Finance; Politics; Democracy; Development