BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 10/2012:
Does finance cause growth? Evidence from the origins of banking in Russia
Daniel Berkowitz ()
, Mark Hoekstra and Koen Schoors
Abstract: This paper examines the effect of banking on economic
growth in modern Russia. To overcome simultaneity and selection, we exploit
regional banking variation induced by the creation of “specialized banks”
(spetsbanks) in the last years of the Soviet Union (1988-1991). Consistent
with the qualitative work of Joel Hellman [1993] and Juliet Johnson [2000],
we show that these reforms generated an ideal natural experiment in that
the concentration of spetsbanks is jointly uncorrelated with 15 predictors
of future growth, including pre-banking income, education, anti-market
sentiment, institutional quality, and government interference in the
economy. Results indicate that while the presence of one additional
spetsbank per million inhabitants increased total within-state lending to
private firms and individuals by 14 to 26 percent in the early 2000s, it
had no effect on investment or per capita income. In contrast, we find that
spetsbanks increased employment. Additional results indicate that
spetsbanks increased growth in regions in which they were less connected to
government and were generally more similar to non-spetsbanks, as well as in
regions that were better at protecting property rights. Our results thus
strongly suggest that bank origins, political connections, and property
rights are important determinants of effective finance.
Keywords: finance; growth; banking; Russia; (follow links to similar papers)
JEL-Codes: F30; G20; O40; P30; (follow links to similar papers)
42 pages, May 2, 2012
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
dp1012.pdf 
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Päivi Määttä ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
