12 Database includes total assets of NBFIs to GDP, which includes pension fund assets to GDP, mutual fund assets to GDP, insurance company assets to GDP, insurance premiums (life) to GDP, and insurance premiums (non-life) to GDP _._ For financial markets, it is possible to obtain cross-country data on stock and bond markets (both sovereign and corporate). To approximate the size of stock markets, the most common choice in the literature is stock market capitalization to GDP. For bond markets, the mostly commonly used proxy for size is the outstanding volume of debt securities (private and public) to GDP.

To measure ―stock market‖ development, this paper primarily uses Stock value traded, which equals the value of stock market transactions as a share of GDP. This market development indicator incorporates information on the size and activity of the stock market, not simply on the value of listed shares. Earlier work by Levine and Zervos (1998) indicates that the trading of ownership claims on firms in an economy is closely tied to the rate of economic development. There is substantial variation across counties. While the mean value of Stock value traded is about 29 percent of GDP the standard deviation is about double this value. In Armenia, Tanzania, and Uruguay, Stock value traded annually averaged less than 0.23 percent over 19802008 (10th percentile). In contrast, Stock value traded averaged over 75 percent in China (both Mainland and Hong Kong SAR), Saudi Arabia; Switzerland; and Unites States (90th percentile).

The relative size of financial institutions and financial markets is an important topic in a part of the financial development literature, in particular the literature on ̳financial structures‘ (Demirgüç-Kunt and Levine 2001; Demirgüç-Kunt, Feyen, and Levine 2012). The ratio of the size indicators for banks and financial markets, called financial structure ratio, can be used to gauge the degree to which the financial system is relatively bank-based or market-based. Financial structure differs markedly across economies. Over the full sample period, the annual average value of the financial structure ratio is 279. Countries such as Australia, India, Singapore, and Sweden have this ratio at or below 2.35 (10th percentile), while Bolivia, Bulgaria, Serbia, and Uganda are examples of countries where this ratio is over 356 (90th percentile).

# _3.2. Financial Access (Inclusion)_

A well-functioning financial system allocates capital based on the expected quality of the project and entrepreneur, not on the accumulated wealth and social connections of the entrepreneur. A well-functioning financial system that overcomes market frictions will more effectively provide financial services to a wide range of firms and households, not just large companies and rich individuals. Thus, to develop informative proxies of financial development, it is useful to move beyond financial depth and also include indicators of financial access—the degree to which the public can access financial services. As with the other measures, both financial institutions and financial markets are examined.

_Financial institutions._ A common proxy variable of access to financial institutions is the number of bank accounts per 1,000 adults. Other variables in this category include the number of bank