Finance and growth: Schumpeter might be wrong in our era. New evidence from Meta-analysis

Abstract

In the first meta-study on the finance-growth nexus, we bridge the gap between Schumpeterian authors and sympathizers of Andersen & Tarp (2003). Over 20 fundamental characteristics that have influenced the debate over the last decades are examined. The empirical evidence is based on 196 outcomes from 20 studies. For the investigated Andersen & Tarp hypotheses, while we find only partial support for their position on the lack of substantial empirical evidence on a positive finance-growth nexus, the stance that a negative nexus is characteristic of African and Latin American countries is strongly rejected. Schumpeter’s thesis might be wrong in our era because of: endogeneity-based estimations, publication bias and, effects of financial activity. A historical justification is also discussed.Meta analysis; Finance; Economic growth; Publication bias