Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/88042 
Year of Publication: 
2004
Series/Report no.: 
Working Paper No. 517
Publisher: 
Inter-American Development Bank, Research Department, Washington, DC
Abstract: 
This paper surveys the theoretical and empirical literature on the role of state-owned banks and also presents some new results and a robustness analysis. The paper shows that state-owned banks located in developing countries have fiscal costs because they are characterized by lower returns than comparable privately owned banks (on the other hand, there is no evidence that state-owned banks located in industrial countries are less profitable than their private counterparts). We then point out that this evidence cannot be used as an argument against the existence of state-owned banks, as this low profitability might stem from state-owned banks’ activity on projects characterized by low private sector investment and high social return. While we find no evidence that the presence of state-owned banks promotes economic growth or financial development, we also find that the evidence that state-owned banks lead to lower growth and financial development is not as strong as previously thought.
Subjects: 
Banking
Privatization
State-owned banks
Financial development
Latin America
JEL: 
G21
H11
O16
Document Type: 
Working Paper

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