Presented by
Dr Rashmi Umesh Arora
GBS Postdoctoral Research Fellow
Department of Accounting, Finance and Economics
Griffith Business School
Griffith University
Abstract
Financial development takes place when financial intermediaries and markets are able to allocate resources and perform other necessary functions by overcoming information costs, transaction costs and enforcement costs (Demirguc-Kunt & Levine 2008). The determinants of financial development, as noted by various studies, are technological innovations, telecommunications, legal environment and political stability (Levine 1997, La Porta, Lopez-de Silanes, Shleifer & Vishny 1998; Djankov, McLiesh & Shleifer 2007; Djankov, La Porta, Lopez-de Silanes & Shleifer 2008). The contribution of human capital to financial development has not been much examined. Some studies have examined the relationship between the interaction of finance and human capital at the cross-country level.
In this study, we empirically test the relationship between financial development and human capital for India at the national and sub-national level separately. At the national level conducting cointegration and unit root tests for the period 1971-2007 we find that financial development and educational indicators are positively associated. Our sub-national level test in a panel dataset applies Ordinary Least Squares method with fixed and random effects covering 23 states of India for the period 1999-2008. Our results showed that gross enrolment rates were positively associated with financial development at the sub-national level. Particularly we found significantly negative relationship between pupil-teacher ratio and financial development. Accessibility to financial services measured in terms of population per bank branch also indicated a negative relationship with financial development. This confirms the findings of earlier studies that physical outreach of banks matters.
When
10 August 2012
12:00pm – 1:00pm
Where
University Centre, BLD (06_03_23
Bond University
Contact Information
Catherine Smith
Database and Research Support
Faculty of Business
Phone: +61 7 5595 55721
