Turkey). The contractual savings data include information on total financial assets and portfolio composition for pension funds and insurance companies (in particular corporate stocks), except for 6 countries for which we have no information on equity investments (Austria, Brazil, France, Japan, Spain, and Turkey). The Worldscope database covers mainly large listed firms. Previous works on this database (Claessens et al. (2000)) shows that for nine East Asian countries, this sample covers between 64% and 96% of the total market capitalization of firms listed on the stock market. We expect that the coverage is better for developed economies.<sup>6263</sup> Table 2 provides the definition of the variables that we use in our estimations. Figure 4a illustrates the spectacular increase<sup>64</sup> in the assets managed by pension funds and life-insurance companies,<sup>6566</sup> relative to GDP. Expressed in rate of growth, the increase is even more impressive. Contractual savings financial assets, relative to GDP, have been growing at an average annual rate of growth of 17.7%, 3.4%, 6.9%, 6.0%, 7.9%, 8.99% and 4.6% respectively in France, Germany, South Africa, the United States, the United Kingdom, Chile and Korea. Figure 4b, however, shows that this evolution is less spectacular when the size of contractual savings institutions is compared to the size of capital markets (bond and stock markets). For a substantial number of countries (10 out of 29, including the United States), contractual savings’ financial assets increases less than the size of capital markets. But this graph highlights another interesting feature: most of the countries in which contractual savings have grown relative to the capital market are located in the bottom half-sample at the beginning of the period. Conversely, contractual savings tend to have grown at a slower pace than the capital markets in the countries located in the top half-sample at the beginning of the period. These two groups of countries roughly correspond to (1) bank-based economies, or economies with underdeveloped financial systems (bottom group), and (2) market-based economies for the top group.

Moreover, there has been a widespread tendency to modify the portfolio in favor of equity investments (except in Korea, Thailand and Brazil) as shown by Figure 5a. Figure 5b confirms that these changes in the portfolio are roughly reflected in the proportion of shares held by contractual savings institutions relative to total stock market capitalization.

Globally, these strong time-series movements suggest that we can hope to capture not only cross-country variations but also within country differences in financing patterns

> 62 Luxembourg and Sri Lanka, for which the firm database is limited to a handful of firms, are dropped in the panel estimates, for we have only 1 year of observation.

> 63 Except in the case of the United States for which the database includes only 417 non-financial firms. We decided to restrict the U.S. data to the Worldscope source to be consistent with past studies using this database, and avoid mixing data from different sources.

> 64 Singapore is the only country in which contractual savings assets decreased relative to GDP.

> 65 Musalem and Impavido (2000) show on this sample of countries, that this explosion of contractual savings institutions may partly explain the rapid growth of stock markets over the last 15 years.

> 66 In France, where pension funds are underdeveloped, the life insurance industry exploded at the beginning of the 90s as a result of strong fiscal incentives to save in life-insurance products (these savings were exempt of taxes).

24