?url_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Adc&rft.title=The+effect+of+financial+development+on+convergence%3A+theory+and+evidence&rft.creator=Aghion%2C+P.&rft.creator=Howitt%2C+P.&rft.creator=Mayer-Foulkes%2C+D.&rft.description=We+introduce+imperfect+creditor+protection+in+a+multi-country+version+of+Schumpeterian+growth+theory+with+technology+transfer.+The+theory+predicts+that+the+growth+rate+of+any+country+with+more+than+some+critical+level+of+financial+development+will+converge+to+the+growth+rate+of+the+world+technology+frontier%2C+and+that+all+other+countries+will+have+a+strictly+lower+long-run+growth+rate.+The+theory+also+predicts+that+in+a+country+that+converges+to+the+frontier+growth+rate%2C+financial+development+has+a+positive+but+eventually+vanishing+effect+on+steady-state+per-capita+GDP+relative+to+the+frontier.+We+present+cross-country+evidence+supporting+these+two+implications.+In+particular%2C+we+find+a+significant+and+sizeable+effect+of+an+interaction+term+between+initial+per-capita+GDP+(relative+to+the+United+States)+and+a+financial+intermediation+measure+in+an+otherwise+standard+growth+regression%2C+implying+that+the+likelihood+of+converging+to+the+U.S.+growth+rate+increases+with+financial+development.+We+also+find+that%2C+as+predicted+by+the+theory%2C+the+direct+effect+of+financial+intermediation+in+this+regression+is+not+significantly+different+from+zero.+These+findings+are+robust+to+alternative+conditioning+sets%2C+estimation+procedures+and+measures+of+financial+development.&rft.publisher=National+Bureau+of+Economic+Research&rft.date=2004-03&rft.type=Working+%2F+discussion+paper&rft.language=eng&rft.source=++++(NBER+Working+Papers++10358).+National+Bureau+of+Economic+Research%3A+Cambridge%2C+US.+(2004)+++++&rft.format=application%2Fpdf&rft.identifier=https%3A%2F%2Fdiscovery.ucl.ac.uk%2Fid%2Feprint%2F17784%2F1%2F17784.pdf&rft.identifier=https%3A%2F%2Fdiscovery.ucl.ac.uk%2Fid%2Feprint%2F17784%2F&rft.rights=open