Are the Institutions of the Stock Market and the Market for Corporate Control Evolutionary Advances for Developing Countries?

This paper explores the question of whether the institution of the stock market is likely to be helpful to developing countries in promoting their real economy and ensuring fast industrial growth. The case for and against the stock market inevitably involves a discussion of the important related subjects of corporate finance and corporate governance. Contrary to the literature the paper arrives at a negative overall assessment of the institution of the stock market in relation to economic development. It also contributes by its policy proposals concerning the markets for corporate control, which again are in conflict with much of the conventional wisdom on the subject

Supranational Supervision - How Much and for Whom?

We argue that the extent to which supervision of banks takes place on the supranational level should be guided by two factors: cross-border externalities from bank failure and heterogeneity in bank failure costs. Based on a simple model we show that supranational supervision is more likely to be welfare enhancing when externalities are high and country heterogeneity is low. This suggests that different sets of countries (or regions) should differ in the extent to which their regulators cooperate across border. We apply the insights of our model to discuss optimal supervisory arrangements for different regions of the world and contrast them with existing arrangements and current policy initiatives. We also offer a political economy discussion on the likelihood with which countries delegate supervisory authority to supranational authorities

Finance and Inequality: Theory and Evidence

In this paper, we critically review the literature on finance and inequality, highlighting substantive gaps in the literature. Finance plays a crucial role in the preponderance of theories of persistent inequality. Unsurprisingly, therefore, economic theory provides a rich set of predictions concerning both the impact of finance on inequality and about the relevant mechanisms. While subject to ample qualifications, the bulk of empirical research suggests that improvements in financial contracts, markets, and intermediaries expand economic opportunities and reduce inequality. Yet, there is a shortage of theoretical and empirical research on the potentially enormous impact of formal financial sector policies, such as bank regulations and securities law, on persistent inequality. Furthermore, we lack a conceptual framework for considering the joint and endogenous evolution of finance, inequality, and economic growth.income distribution, development, growth, banks, capital markets, regulation