Law, Finance, and Economic Growth

Posted: 25 Jan 1999

See all articles by Ross Levine

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)


This paper examines the question of how the legal environment affects financial development, and then asks how this in turn is linked to long-run economic growth. Financial intermediaries are better developed in countries with legal and regulatory systems that (1) give a high priority to creditors receiving the full present value of their claims on corporations, (2) enforce contracts effectively, and (3) promote comprehensive and accurate financial reporting by corporations. The data also indicate that the exogenous component of financial intermediary development--the component defined by the legal and regulatory environment--is positively associated with economic growth.

JEL Classification: G21, K12, O16

Suggested Citation

Levine, Ross Eric, Law, Finance, and Economic Growth. Journal of Financial Intermediation, Vol. 8, No. 1, 1998. Available at SSRN:

Ross Eric Levine (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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2220 Piedmont Avenue
Berkeley, CA 94720
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National Bureau of Economic Research (NBER)

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