مزیت نسبی، تقاضا برای سرمایه گذاری خارجی و توسعه مالی

This paper analyzes the effect of comparative advantage in international trade on a country's level of financial development. Countries with comparative advantage in financially intensive goods experience a higher demand for external finance, and therefore financial development. By contrast, financial development is lower in countries that primarily export goods which do not rely on external finance. We use disaggregated trade data to develop a measure of a country's external finance need of exports, and demonstrate this effect empirically. In order to overcome the simultaneity problem, we develop a novel instrumentation strategy based on the exogenous geographic determinants of trade patterns.

A quick glance at the levels of financial development across countries reveals large differences. Fig. 1 plots the ratios of private credit to GDP and trade openness to GDP starting in 1970 for developing and advanced countries. The average share of private credit to GDP is more or less three times higher in advanced countries than in developing countries throughout the period. On the other hand, trade volume as a share of GDP grew faster in developing countries, which have now surpassed the advanced ones. What explains persistent financial underdevelopment? In particular, can we say something about the relation between financial development and trade openness?

It is often argued that institutional quality in general and financial development in particular are shaped largely by exogenous historical events. It is then natural to think of the financial system as an endowment, and therefore differences in financial development as sources of comparative advantage in trade. This paper takes a different view by asking instead whether trade patterns in turn affect countries’ financial development. This is an important question. There is a great deal of evidence that financial development is a key determinant of economic growth (see Levine, 2005, for a survey). On the other hand, the debate about the effect of trade on growth is far from settled.22 This paper demonstrates that trade affects financial development directly, a mechanism for the impact of trade on growth that has not previously been examined.