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Political institutions and financial cooperative development

  • AMR KHAFAGY (a1)

This paper analyses the influence of political institutions on the development of financial cooperatives. It proposes a political economy theory where autocratic regimes deliberately oppose the development of a well-functioning financial cooperative sector to maintain their political influence, and prevent the formation of strong pressure groups that can threaten the current political status quo and reduce the governing elites’ economic benefits from underdeveloped and exclusive financial sector. Using panel data from 65 developing countries from 1995–2014, the results show that democracy, political rights and civil liberties promote financial cooperative development. These results are robust in controlling for endogeneity as well as other economic and institutional factors.

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D. Acemoglu and J. A. Robinson (2005), Economic Origins of Dictatorship and Democracy, New York: Cambridge University Press, pp. 4863.

G. S. Becker (1983), ‘A Theory of Competition Among Pressure Groups for Political Influence’, The Quarterly Journal of Economics, 98(3): 371400.

S. Claessens and L. Laeven (2003), ‘Financial Development, Property Rights, and Growth’, The Journal of Finance, 58(6): 24012436.

V. Nienhaus (1993), ‘The Political Economy of Development Finance’, Managerial Finance, 19(7): 820.

R. G. Rajan and L. Zingales (2003), ‘The Great Reversals: The Politics of Financial Development in the Twentieth Century’, Journal of Financial Economics, 69(1): 550.

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Journal of Institutional Economics
  • ISSN: 1744-1374
  • EISSN: 1744-1382
  • URL: /core/journals/journal-of-institutional-economics
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