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This paper examines how financial development affects the sources of growth—productivity and investment—using a sample of 145 countries for the period 1960-2011. We employ a range of econometric approaches, focusing on the CCA and MENA countries. The analysis looks beyond financial depth to capture the access, efficiency, stability, and openness dimensions of financial development. Yet even in this broad interpretation, financial development does not appear to be a magic bullet for economic growth. We cannot confirm earlier findings of an unambiguously positive relationship between financial development, investment, and productivity. The relationship is more complex. The influence of the different dimensions of financial development on the sources of growth varies across income levels and regions.

Financial institutions --- Capital market --- Economic development --- Development, Economic --- Economic growth --- Growth, Economic --- Economic policy --- Economics --- Statics and dynamics (Social sciences) --- Development economics --- Resource curse --- Capital markets --- Market, Capital --- Finance --- Loans --- Money market --- Securities --- Crowding out (Economics) --- Efficient market theory --- Financial intermediaries --- Lending institutions --- Associations, institutions, etc. --- E-books --- Finance: General --- Investments: Stocks --- Macroeconomics --- Production and Operations Management --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Economic Growth and Aggregate Productivity: General --- Financial Markets and the Macroeconomy --- General Financial Markets: General (includes Measurement and Data) --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Aggregate Factor Income Distribution --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Investment & securities --- Financial sector development --- Stock markets --- Total factor productivity --- Income --- Stocks --- Financial markets --- National accounts --- Financial services industry --- Stock exchanges --- Industrial productivity --- United States

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We study the channels that theoretically transmit the effects of inequality to economic growth, unlike much of the existing literature that focuses on the direct linkage. The role of inequality in these transmission channels is difficult to pin down and varies with the particular inequality indicator chosen. We run our analyses with six methodologically distinct inequality measures (Gini coefficients and Top10 income shares). Methodological differences within the set of Gini coefficients and the Top10 income shares exert a first-order impact on the estimated relationships, which is generally larger than the effect of switching between Gini and Top10 income shares. For a given inequality indicator, we find that the transmission channels can react in opposite directions, with the net effect on growth difficult to determine. Finally, we emphasize two additional but so far underappreciated empirical complications: (i) estimated relationships change over time; and (ii) fragile countries create significant but counterintuitive empirical associations that may obscure structural relationships.

United States --- Labor --- Macroeconomics --- Personal Income, Wealth, and Their Distributions --- Socialist Institutions and Their Transitions: Consumer Economics --- Health, Education and Training, Welfare, and Poverty --- Political Economy --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Aggregate Factor Income Distribution --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Labour --- income economics --- Income inequality --- Personal income --- Income distribution --- Human capital --- Disposable income --- National accounts --- Income --- National income