| Abstract: |
Research on credit markets from developing economies, as well as work on the
origin of institutions in general, has suggested that land inequality may play
a role in determining financial development. In this paper we establish
empirically that initial land inequality is a significant predictor of
financial depth across countries, even while controlling for other predictors
such as legal origin, ethnic fractionalization, and income inequality. To
examine this relationship we have created a new measure of land distribution
within countries that builds upon the work of Deininger and Squire (1998) by
explicitly accounting for landlessness. In addition to being a significant
predictor of financial development, land inequality is found to be
uncorrelated with other fundamental characteristics of economies, suggesting
its possible use in a wider range of research. |