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 …

We model technological and financial innovation as reflecting the decisions of profit maximizing agents and explore the … also engage in the costly, risky, and potentially profitable process of innovation: Financiers can invent more effective …. Consequently, technological innovation and, thus, economic growth stop unless financiers continually innovate. Historical …

We model technological and financial innovation as reflecting the decisions of profit-maximizing agents and explore the …, risky, and potentially profitable process of innovation: Financiers can invent more effective processes for screening … evolve endogenously. The model predicts, therefore, that technological innovation and economic growth eventually stop unless …