Further Evidence on the Link between Finance and Growth: An International Analysis of Community Banking and Economic Performance

The central problem of life-cycle finance is the spreading of the income from the economically productive part of an individual’s life over that person’s whole life. As with all financial problems, this task is made difficult by time and uncertainty. Merely setting aside a portion of one’s income for later use does not mean that it will be there—in real (inflation-adjusted) terms—when it is needed. No investment is riskless if the “run” is long enough. In addition, there is the ordinary risk that the realized return will be lower than the expected return. Finally, no one knows how long he or she is going to live. The...