Land Distribution and Financial System Development

Author/Editor:

Dietrich Vollrath ; Lennart Erickson

Publication Date:

April 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Research on credit markets from developing economies, as well as work on the origin of institutions in general, has suggested that land inequality may play a role in determining financial development. In this paper we establish empirically that initial land inequality is a significant predictor of financial depth across countries, even while controlling for other predictors such as legal origin, ethnic fractionalization, and income inequality. To examine this relationship we have created a new measure of land distribution within countries that builds upon the work of Deininger and Squire (1998) by explicitly accounting for landlessness. In addition to being a significant predictor of financial development, land inequality is found to be uncorrelated with other fundamental characteristics of economies, suggesting its possible use in a wider range of research.

Series:

Working Paper No. 07/83

Subject:

English

Publication Date:

April 1, 2007

ISBN/ISSN:

9781451866476/1018-5941

Stock No:

WPIEA2007083

Format:

Paper

Pages:

30

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