Financial structure and economic growth: the role of heterogeneity1

In this article we use Bayesian classification and finite mixture models to extract information from Levine's (Citation2002) cross-country database and reconsider the relationship between financial structure and long-run economic growth. Our methods, based on statistical similarities and multi-dimensional structures, allow for parameter heterogeneity across the countries in Levine's database and yield substantially different findings than Levine's regarding the relationship between financial structure and economic performance. 1This article builds on material from Karl Pinno's PhD dissertation at the University of Calgary.