Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: Growth and Development I F20-V2
We investigate the relationship between capital misallocation and financial development in six countries at different levels of development. We find that more developed financial systems perform better at allocating capital investment. If financial development is low, faster capital accumulation results in a worsening of allocative efficiency. This effect reverses for higher levels of financial development. Sectors with high R&D expenditures or high capital investment benefit most.