Finance and Centre-Periphery Dynamics: A Model
Antonio Luigi Paolilli, Fabio Pollice
DOI: 10.4236/ib.2011.33033   PDF   HTML   XML   5,814 Downloads   8,858 Views  


In the last few decades we have witnessed a marked process of economic globalization (that is the growing interrelation and integration of the economic systems of the whole world), accompanied and favoured by what is called financialization (whose definition is more problematic, but we can identify it as the growing relative importance of financial profits compared to those deriving from trade and production of real goods). In this paper, after briefly discussing and defining the two phenomena in the light of the debate about them, we will present a mathematical model to study their effects on the economic development of regions with a different initial capital set-up, which includes human and organizational capital. The model shows that low wages in certain conditions can determine high interest rates, favouring financial flows from peripheral areas to developed countries.

Share and Cite:

A. Paolilli and F. Pollice, "Finance and Centre-Periphery Dynamics: A Model," iBusiness, Vol. 3 No. 3, 2011, pp. 248-261. doi: 10.4236/ib.2011.33033.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] M. Ravaillon and S. Chen, “China’s (Uneven) Progress against Poverty,” World Bank, Policy Research Working Paper, Article No. 3408, 2004.
[2] C. Calderon, L. Liu, “The Direction of Causality between Financial Development and Economic Growth,” Journal of Development Economics, Vol. 72, No. 1, 2003, pp. 321-334. doi:10.1016/S0304-3878(03)00079-8
[3] J. Schumpeter, “The Theory of Economic Development,” Harvard University Press, Cambridge (Mass.), 1934.
[4] J. H. Lopez, “Pro-poor Growth: A Review of What We Know (and of What We Don’t),” World Bank, Washington DC, 2004.
[5] R. McKinnon, “Money and Capital in Economic Development,” Brookings Institution, Washington DC, 1973.
[6] E. Shaw, “Financial Deepening in Economic Development,” Oxford University Press, Oxford, 1973.
[7] G. A. Epstein, “Rentier Incomes and Financial Crises: An Empirical Examination of Trends and Cycles in Some OECD Countries,” Canadian Journal of Development Studies (with Dorothy Power).
[8] G. Krippner, “What is Financialization?” University of California, Los Angeles, 2004.
[9] G. A. Epstein, “Capital Flight and Capital Controls in Developing Countries,” Edward Elgar Press, Northampton, Forthcoming, 2004.
[10] T. I. Palley, “Financialization: What It Is and Why It Matters,” Working Paper No. 525, The Levy Economics Institute and Economics of Barde College, New York, 2007.
[11] S. Andriani, “L’ascesa Della Finanza. Risparmio, Banche, Assicurazioni: I Nuovi Assetti Dell’economia Mondiale,” Donzelli Editore, Rome, 2006.
[12] A. L. Paolilli, “Development and Crisis in the Late Middle Ages: The Role of Trade,” Journal of European Economic History, Vol. 34, No. 3, 2005, pp. 687-717.
[13] A. L. Paolilli, “Development and Crisis in Ancient Rome: The Role of Mediterranean Trade,” Historical Social Research, Vol. 33, No. 4, 2008, pp. 274-289.
[14] S. Andriani, “L’ascesa Della Finanza. Risparmio, Banche, Assicurazioni: I Nuovi Assetti Dell’economia Mondiale,” Donzelli Editore, Rome, 2006.
[15] J. Schumpeter, “Theorie der Wirtschaftlichen Entwicklung (English Edition: “The Theory of Economic Development”)”, Harvard University Press, Cambridge (Mass.), 1934.
[16] T. B. Veblen, “The Theory of Business Enterprise,” Scribner’s, New York, 1904.
[17] S. Spratt, “Development Finance. Debates, Dogmas and New Directions,” Routledge, London and New York, 2009.
[18] C. Diaz-Alejandro, “Good-Bye Financial Repression, Hello Financial Crash,” Journal of Development Economics, Vol. 19, No. 1-2, 1985, pp. 1-24. doi:10.1016/0304-3878(85)90036-7
[19] M. Buchanan, “The Social Atom,” Bloomsbury Press, New York, 2007.

Copyright © 2023 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.