This paper by Ross Levine examines the debate on whether bank-based or market-based financial systems are more effective in promoting long-run economic growth. The study challenges the traditional dichotomy between these two systems, arguing that neither is consistently better. Using a broad cross-country dataset from 1980 to 1995, the paper evaluates financial structure and economic growth, focusing on indicators such as financial system activity, size, efficiency, and regulatory restrictions. The results show no significant relationship between financial structure (bank-based or market-based) and economic growth, suggesting that the type of financial system is not a key determinant of growth. Instead, the paper supports the financial services view, emphasizing that the quality of financial services—regardless of whether they are provided by banks or markets—is more important for economic growth. The study also highlights the critical role of the legal system in shaping financial development and economic performance. Overall, the findings suggest that policies should focus on improving the legal and regulatory environment rather than favoring one type of financial system over another.This paper by Ross Levine examines the debate on whether bank-based or market-based financial systems are more effective in promoting long-run economic growth. The study challenges the traditional dichotomy between these two systems, arguing that neither is consistently better. Using a broad cross-country dataset from 1980 to 1995, the paper evaluates financial structure and economic growth, focusing on indicators such as financial system activity, size, efficiency, and regulatory restrictions. The results show no significant relationship between financial structure (bank-based or market-based) and economic growth, suggesting that the type of financial system is not a key determinant of growth. Instead, the paper supports the financial services view, emphasizing that the quality of financial services—regardless of whether they are provided by banks or markets—is more important for economic growth. The study also highlights the critical role of the legal system in shaping financial development and economic performance. Overall, the findings suggest that policies should focus on improving the legal and regulatory environment rather than favoring one type of financial system over another.