The paper examines the effect of financial development on convergence, using a Schumpeterian growth model with imperfect creditor protection. The theory predicts that countries with sufficient financial development will converge to the growth rate of the world technology frontier, while others will have lower long-run growth rates. Empirical evidence supports these predictions, showing a significant negative coefficient on the interaction between financial intermediation and initial per-capita GDP relative to the United States. Other variables like schooling, geography, health, policy, and institutions do not significantly affect this interaction or have independent effects on convergence. The findings are robust to various tests, including removal of outliers and alternative measures of financial development. The paper also explores the theoretical implications of financial constraints on technology transfer. It introduces credit constraints into a multicountry Schumpeterian growth model with technology transfer, showing that the model implies a form of club convergence consistent with observed facts. The key components of the theory include the role of technological knowledge, increasing complexity in technology, and an agency problem limiting access to external finance. The model predicts that countries above a certain financial development threshold will converge to the same long-run growth rate, while others will have lower growth rates. The paper also presents empirical evidence supporting these implications, using a cross-country growth regression with an interaction term between financial development and initial per-capita GDP. The results show a significant negative effect of financial development on convergence, with the effect diminishing as financial development increases. The findings are robust to alternative conditioning sets, estimation procedures, and measures of financial development. The paper also tests the robustness of results against outliers and alternative instruments, finding that the main implications of the theory hold. The results suggest that financial development has a positive but eventually vanishing effect on the steady-state level of per-capita GDP relative to the frontier. The paper concludes that financial development plays a crucial role in determining convergence, with the effects of financial development on convergence being mediated through productivity growth rather than capital accumulation.The paper examines the effect of financial development on convergence, using a Schumpeterian growth model with imperfect creditor protection. The theory predicts that countries with sufficient financial development will converge to the growth rate of the world technology frontier, while others will have lower long-run growth rates. Empirical evidence supports these predictions, showing a significant negative coefficient on the interaction between financial intermediation and initial per-capita GDP relative to the United States. Other variables like schooling, geography, health, policy, and institutions do not significantly affect this interaction or have independent effects on convergence. The findings are robust to various tests, including removal of outliers and alternative measures of financial development. The paper also explores the theoretical implications of financial constraints on technology transfer. It introduces credit constraints into a multicountry Schumpeterian growth model with technology transfer, showing that the model implies a form of club convergence consistent with observed facts. The key components of the theory include the role of technological knowledge, increasing complexity in technology, and an agency problem limiting access to external finance. The model predicts that countries above a certain financial development threshold will converge to the same long-run growth rate, while others will have lower growth rates. The paper also presents empirical evidence supporting these implications, using a cross-country growth regression with an interaction term between financial development and initial per-capita GDP. The results show a significant negative effect of financial development on convergence, with the effect diminishing as financial development increases. The findings are robust to alternative conditioning sets, estimation procedures, and measures of financial development. The paper also tests the robustness of results against outliers and alternative instruments, finding that the main implications of the theory hold. The results suggest that financial development has a positive but eventually vanishing effect on the steady-state level of per-capita GDP relative to the frontier. The paper concludes that financial development plays a crucial role in determining convergence, with the effects of financial development on convergence being mediated through productivity growth rather than capital accumulation.