An Interest Group Theory of Financial Development

My work contributes to current explanations of the variance in financial development across countries by considering the role of political and legal structure in determining the effect of private interests on financial policy and illustrating the political obstacles that policymakers face when reforming the financial system. In Chapter 2, I present a political economy model to study the role of politics in the process of financial development across emerging markets. The model concludes that both special interest groups and political structure affect the level of credit market development chosen in equilibrium…

Contents

Chapter 1: Introduction
Chapter 2: An Interest Group Theory of Credit Market Development
1. Introduction
2. A Simple Model of Financial Development
2.1 Setup
2.2 Perfect Credit Markets: Case of 1 = λ
2.3 Complete Financial Repression: Case of 0 = λ
2.4 Imperfect Markets: Case of ) 5 . 0 , 0 ( ∈ λ
3. Welfare
3.1 Politically Organized Unconstrained Firms (The SIG)
3.2 Politically Unorganized Unconstrained Entrepreneurs
3.3 Constrained Entrepreneurs
3.4 Poor Lenders
3.5 Aggregate Welfare
4. Political Utility
5. Political Equilibrium
6. Comparative Statics Under Imperfect Credit Markets
6.1 Change in Productivity
6.2 Percent Change in Wealth Per Capita
6.3 Change in Financial Openness
6.4 Percent Change in Wealth Inequality
7. Concluding Remarks
Chapter 3: An Empirical Analysis of Political Institutions and Credit Market Development
1. Introduction
2. Veto Players under Different levels of Political Accountability
3. Data
4. Empirical Strategy
5. Results
5A. Strategy 1: Clustering Standard Errors by Country
5B. Strategy 2: The Effect of Liberalization
5C. Strategy 3: Averaging Data in 5-year intervals
5D. Strategy 4: Ownership as the Dependent Variable
6. Conclusion
Chapter 4: Securities Laws, Firm Size, and Capital Issuance
1. Introduction
2. Methodology
3. Data
4. Microeconomic Testing Strategy of LLS (2004)
5. Results
6. Robustness Check
7. Conclusions
Appendices
Bibliography

Author: Richardson, Nela N. Thomas

Source: University of Maryland

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