AEAweb: Journal Article Full-Text Access
Note to Institutional Subscribers: If you normally access AEAweb journal content via your university or firm's subscription and receive this page, please click
here. The most likely causes of this are a recently changed IP address, a new subscription, or the renewal of a lapsed institutional subscription. This page will stop appearing on the next synchronisation of the document delivery and authentication systems.
You may also click here for pay-per-view, Athens login and other access options .
AEA Members, please click the button below to access the login form:
Greenwood, Jeremy,
Juan M. Sanchez, and
Cheng Wang. 2010. "Financing Development: The Role of Information Costs."
,
100(4): 1875-91.
Show Article Details
DOI: 10.1257/aer.100.4.1875
Abstract:To address how technological progress in financial intermediation affects the economy, a costly-state verification framework is embedded into the standard growth model. The framework has two novel ingredients. First, firms differ in the risk/return combinations that they offer. Second, the efficacy of monitoring depends upon the amount of resources invested in the activity. A financial theory of firm size results. Undeserving firms are over-financed, deserving ones under-funded. Technological advance in intermediation leads to more capital accumulation and a redirection of funds away from unproductive firms toward productive ones. With continued progress, the economy approaches its first-best equilibrium. (JEL G21, G31, O16, O33, O41)
Additional links:
Online Appendix
Authors:
Greenwood, Jeremy (U PA)
Sanchez, Juan M. (Federal Reserve Bank of Richmond and Federal Reserve Bank of St Louis)
Wang, Cheng (Fudan U and IA State U)
JEL Classifications:
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
O33: Technological Change: Choices and Consequences; Diffusion Processes
O41: One, Two, and Multisector Growth Models
If you are an AEA member and do not have an AEAweb login, please
click here.
If you would like to become an AEA member, please see our
membership page.
If you arrived at this page via a journal article link, you will be redirected to the pdf after successful login.
If your first login attempt fails, and you have recently signed up for access or have recently changed your password, you may need to wait a few moments and try again.
Please contact us at
notify@aeaweb.org with any problems or questions.
Contents of Current Issues
May 2013 AER
Spring 2013 JEP
May 2013 AEJ: Policy
May 2013 AEJ: Micro
April 2013 AEJ: Macro
April 2013 AEJ: Applied
March 2013 JEL
Virtual Field Journals
In the News:
The Huffington Post reports on a study addressing the influence of lifestyle factors on shrinking height in the elderly published in the April issue of AEJ: Applied Economics.
Michael Frakes' (Cornell Law School) article on medical liability standards from the February issue of the American Economic Review was discussed as part of a Bloomberg opinion piece on medical malpractice.
Slate Magazine recently discussed former AEA president, George Akerlof's classic behavioral research and a 2012 American Economic Review study conducted by German and Swiss researchers to explore how gifting can motivate some employees more than cash incentives do in the workplace.
Contact Us
