Abstract

http://ssrn.com/abstract=2409500
 


 



Financial Development and Genetic Diversity


Eric Cardella


Texas Tech University

Ivalina Kalcheva


University of California, Riverside (UCR) - Department of Finance and Management Science

Danjue Shang


University of Arizona

April 9, 2014


Abstract:     
A growing body of literature suggests that a country’s level of financial development plays an important and inextricable role in the economic growth process. There is substantial variation in the level of financial development across countries that research has been trying to explain. In this paper, we investigate how a deep-rooted characteristic – a country’s degree of genetic diversity – impacts the level of financial development. Building on the recent work by Ashraf and Galor (2013 AER), we hypothesize that a country’s degree of genetic diversity can impact its level of financial development through two channels: (i) indirectly through its effect on productivity and the subsequent demand for financial development, and (ii) directly through its effect on innovation in the financial sector. Paralleling the argument put forth by Ashraf and Galor, we predict a hump-shaped relationship between a country’s degree of genetic diversity and its level of financial development. Using data from almost 150 countries, our cross-sectional analysis reveals results that are consistent with our prediction; namely, we observe a significant hump-shaped relation between a country’s degree of genetic diversity and its level of financial development. This result is robust to several different proxy measures of financial development, and various controls that have previously been shown to impact financial development.

Number of Pages in PDF File: 43

Keywords: financial development, genetic diversity

JEL Classification: G1, G2, O1, O4, O5

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Date posted: March 16, 2014 ; Last revised: April 10, 2014

Suggested Citation

Cardella, Eric and Kalcheva, Ivalina and Shang, Danjue, Financial Development and Genetic Diversity (April 9, 2014). Available at SSRN: http://ssrn.com/abstract=2409500 or http://dx.doi.org/10.2139/ssrn.2409500

Contact Information

Eric Cardella
Texas Tech University ( email )
Rawls College of Business
Lubbock, TX 79409
United States
Ivalina Kalcheva (Contact Author)
University of California, Riverside (UCR) - Department of Finance and Management Science ( email )
900 University Avenue
Riverside, CA 92521
United States
Danjue Shang
University of Arizona ( email )
Department of Finance
Eller College of Management
Tucson, AZ 85721
United States
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