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Title:The effect of financial liberalization on capital accumulation, endogenous growth, and interindustry wage differentials: The case of Taiwan
Author(s):Wu, Roung-Jen
Doctoral Committee Chair(s):Heins, A. James
Department / Program:Economics
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Economics, Finance
Business Administration, Banking
Abstract:The main purpose of the thesis is to investigate the link between financial policy and economic growth by focusing on the link between financial intermediation and capital accumulation. The investigation strategy is to examine the effect of recent reform in financial markets in Taiwan on its industrial growth as case study and test several hypotheses suggested by recent theoretical studies. A key hypothesis tested in the thesis is whether knowledge can create an increase in returns to capital through an external effect of knowledge spillovers on capital investment. If capital-related external effects do exist in an economy, then the importance of capital accumulation in the process of economic growth will be maintained within endogenous growth models which emphasize that technological change is of central importance in economic growth. Furthermore, the existence of Marshallian external increasing returns implies that financial liberalization can have an important effect on economic growth.
The major findings in the thesis are stated as follows. First, evidence shows that financial liberalization has promoted financial intermediation and allocative efficiency of credit by relaxing financial constraints faced by firms in their access to external funding and thus stimulating capital accumulation. Next, econometric results show that the external effects associated with capital investment do exist in the economy and, more importantly, technology has been advanced and marginal productivity of capital has increased since liberalization. Thus, this implies that the increase in capital accumulation due to financial liberalization promotes more economic growth through the capital-related externality in the economy. Moreover, allocative efficiency of both capital and labor has been improved since liberalization. Finally, financial liberalization has led to recent widening of interindustry wage differentials.
Issue Date:1996
Rights Information:Copyright 1996 Wu, Roung-Jen
Date Available in IDEALS:2011-05-07
Identifier in Online Catalog:AAI9702718
OCLC Identifier:(UMI)AAI9702718

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