Is financial innovation necessary for sustaining economic growth? To address this question, we build a Schumpeterian … innovation: they can invent better methods for screening entrepreneurs. Second, every screening process becomes less effective as … technology advances. The model predicts that technological innovation and economic growth eventually stop unless financiers …

inequality. Examples include research subsidies or a decline in the extent to which incumbent firms can block new innovation …

. Moreover, the answer is in the affirmative, both in theory and in practice. In particular, recent theoretical work predicts …