Edited by Thorsten Beck - Vox

VOX Research-based policy analysis and commentary from leading economists
parasite-resistant crops, and other innovations linked to biotechnology would almost
certainly be occurring at a far slower pace.
Conclusion
The operation of the financial system exerts a powerful influence on economic growth
and the opportunities available to individuals. Well-functioning financial systems
allocate resources to those with the best ideas and entrepreneurial skills, enhancing
efficiency and expanding economic horizons. Poorly functioning financial systems
funnel credit to those with strong political and social connections, with harmful
ramifications on economic welfare.
Author’s Note: This paper draws liberally from “Regulating Finance and Regulators
to Promote Growth,” which was presented at the Federal Reserve Bank of Kansas
City’s Symposium, Achieving Maximum Long-Run Growth, which was held in Jackson
Hole, Wyoming on August 25-27, 2011 and will be published in the proceedings of that
symposium.
References
Beck, Thorsten, Ross Levine, and Alexey Levkov (2010) “Big Bad Banks? The Winners
and Losers from US Branch Deregulation.” Journal of Finance 65: 1637-1667.
King, Robert G, and Ross Levine (1993) “Finance and Growth: Schumpeter Might Be
Right.” Quarterly Journal of Economics 108: 717-38.
Laeven, Luc, Ross Levine, and Stelios Michalopoulos (2011) “Financial and Innovation
and Endogenous Growth.” Brown University, mimeo.
Levine, Ross (2005) “Finance and Growth: Theory and Evidence.” in Handbook of
Economic Growth, Eds., Aghion, P. and S. Durlauf, 1A, pp. 865-934, North-Holland
Elsevier, Amsterdam.
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