Financial Institutional Reform, Growth and Equality
(2006) Institutions, Development, and economic growth — ISBN: [978-0-262-05081-4], p. 33-64
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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 long-run 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.
- Affiliations
University of California, Los Angeles Department of Economics
Citations
De la Croix, D., & Aziardis, C. (2006). Financial Institutional Reform, Growth and Equality. In Theo S. Eicher and Cecilia García-Peñalosa (ed.), Institutions, Development, and economic growth (p. p. 33-64). MIT Press. https://hdl.handle.net/2078.5/249796