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Financial Intermediation and Employment

Author

Listed:
  • Manoj Pant

    (Manoj Pant is at the Jawaharlal Nehru University (JNU), New Delhi. E-mail: manojp@mail.jnu.ac.in)

  • Prabal Roy Chowdhury

    (Prabal Roy Chowdhury in at the Indian Statistical Institute (ISI), New Delhi. E-mail: prabalrc@isid.ac.in)

  • Gurbachan Singh

    (Gurbachan Singh is at the Jawaharlal Nehru University, New Delhi. E-mail: gbsingh@mail.jnu.ac.in)

Abstract

In our model, there are entrepreneurs and other agents. The latter have labour and capital, but no entrepreneurship. They are employed for a wage, or they are self-employed (which is inefficient). If they are employed for a wage, they invest their capital in financial assets. Otherwise, they take up self-employment, which requires capital and leaves little scope for buying financial assets. It can then be shown that investment in financial assets and wage employment are positively correlated. The model helps explain why a small financial system and low wage employment are observed in less developed countries that have high cost of financial intermediation.

Suggested Citation

  • Manoj Pant & Prabal Roy Chowdhury & Gurbachan Singh, 2009. "Financial Intermediation and Employment," Review of Market Integration, India Development Foundation, vol. 1(1), pages 61-82, April.
    • Handle: RePEc:sae:revmar:v:1:y:2009:i:1:p:61-82
    DOI: 10.1177/097492920900100104
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    References listed on IDEAS

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    6. Simon C. Parker & Yacine Belghitar & Tim Barmby, 2005. "Wage Uncertainty and the Labour Supply of Self-Employed Workers," Economic Journal, Royal Economic Society, vol. 115(502), pages 190-207, March.
    7. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-276, June.
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    Cited by:

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    2. Haruna Mohammed Aliero & Saifullahi Sani Ibrahim & Mukhtar Shuaibu, 2013. "An Empirical Investigation into the Relationship between Financial Sector Development and Unemployment in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(10), pages 1361-1370, October.
    3. Barış Sancak & Dilek Demirbaş, 2024. "The Effect Of Financial Literacy On Participation In Investment Markets: A Study On University of Health Sciences Students," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 11(2), pages 204-225, July.

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    More about this item

    Keywords

    Financial intermediation; employment; less developed country; JEL Classification: G20; JEL Classification: J23; JEL Classification: O17;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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