Endogenous Political Institutions and Financial Development

39 Pages Posted: 3 Aug 2017

See all articles by Thomas Lambert

Thomas Lambert

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Paolo F. Volpin

City University London - Faculty of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: July 8, 2017

Abstract

This chapter surveys the literature on the political economy of finance. This field offers three main insights. First, it highlights the importance of the role of political institutions in financial development. Second, it shows how the distribution of political power in society drives the prevailing set of contracting institutions and affects capital allocation and access to finance in developed and developing economies. Third, it argues that recognizing the endogenous nature of political institutions is crucial for our understanding of the evolution and functioning of financial systems.

Keywords: banking sector, financial development, law and finance, political economy, political institutions, political power, stock markets, suffrage institutions

JEL Classification: D7, G00, G01, K00, O16, P16

Suggested Citation

Lambert, Thomas and Volpin, Paolo F., Endogenous Political Institutions and Financial Development (July 8, 2017). Available at SSRN: https://ssrn.com/abstract=3011974 or http://dx.doi.org/10.2139/ssrn.3011974

Thomas Lambert (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.sites.google.com/site/lambertthom

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Paolo F. Volpin

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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