Costly intermediation, the big push and the big crash

Finance and Governance in Developing Economies

“…Further, firms need consumers, but well-paid employees are rare in most LDCs (Clark 1940;Kuznets 1957;Nurkse 1953;Lewis 1954). Each firm thus depends on wages and employment throughout the economy (Rosenstein-Rodan 1943;Myrdal 1957;Chen 1995;Becsi et al 1999). Sustainably well paid employees must be productive, and therefore educated and healthy, but public education and healthcare remain appalling in many LDCs (Sachs 2008).…”

“…Market power persists if entrants lack financing (Nurkse 1953;Williamson 1975). In many LDCs, financial systems are stunted (King and Levine 1993;La Porta et al 1998); intermediation is costly (Becsi et al 1999;DeSoto 1989DeSoto , 2000; and capital is allocated inefficiently (Rajan & Zingales 1998;Wurgler 2000). Most LDCs financial systems are either state-controlled (La Porta et al 2002), with attendant government failure problems (Shleifer and Vishny 1998), or business family-controlled (Di Caprio et al 2007), with attendant elite capture problems (Morck, Yavuz & Yeung 2010).…”

Opening a stock exchange

“…In Aghion et al (2005), financial development affects growth by encouraging firms to invest, enabling them to absorb international technology transfer. In Becsi et al (1999), financial structure affects the relationship between aggregate expectations and employment, so small increases in financial development can result in the economy switching to the high-employment equilibrium. In Boyd andBencivenga et al (1995), equity markets may not be necessary at low levels of economic and financial development, respectively, but can increase growth by affecting firms' technology choices once threshold levels of economic and financial development are attained.…”

Financial deepening and business cycle volatility in Korea

“…Similarly,Becsi et al (1999) theoretically provided the possibility that active financial market participation may have an adverse effect on the real economy in the presence of participation externality and fixed entry cost.1694 J. Hwang and J. H. Lee Downloaded by [University of Auckland Library] at 12:39 04 February 2015…”