Growth or equality ? Losers and gainers from financial reform
(2002)
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- Abstract
- We explore the consequences of liberalized credit markets for growth and inequality in a lifecycle economy with physical and human capital accumulation, populated by households of different abilities, and calibrated to match the longrun economic performance of a panel of emerging countries. Relatively modest improvements in extending credit to the ablest households appear to have large economic consequences: upfront costs (slower initial growth, higher income inequality) followed by delayed benefits (faster long-run growth). Reform also lowers lifecycle utility for a substantial majority of currently active households. Premature liberalization in the least developed countries (low TFP or capital intensity) may redirect economic growth towards a poverty trap.
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Citations
Azariadis, C., & De la Croix, D. (2002). Growth or equality ? Losers and gainers from financial reform (ECON Working Papers 2002/36). https://hdl.handle.net/2078.5/77061