We Are All Ross Levinians Now

So says Kevin Grier:

In my 2007 JDE paper with Mrs. Angus, we documented that the only variables we could find who's temporal evolution was consistent with that of the world income distribution were measures of financial development and of research and development.

In a current project, my co-authors and I are finding that financial development is at least as important as any traditional factor of production in determining the production structure of an economy (no link yet due to picky co-authors! 8^) ).

And, in a current NBER working paper (ungated version here), Arellano, Bai and Zhang argue that financial development can explain a large amout of the variation in performances between firm of different sizes across countries. Here's their abstract:

"This paper studies the impact of cross-country variation in financial market development on firms' financing choices and growth rates using comprehensive firm-level datasets. We document that in less financially developed economies, small firms grow faster and have lower debt to asset ratios than large firms. We then develop a quantitative model where financial frictions drive firm growth and debt financing through the availability of credit and default risk. We parameterize the model to the firms' financial structure in the data and show that financial restrictions can account for the majority of the difference in growth rates between firms of different sizes across countries."

We are all Ross Levinians now!