Development Dynamics in an Economy with Credit Rationing and Occupational Choice
نویسنده
چکیده
The paper presents a general equilibrium model of a developing economy, in which the wealth distribution, the interest rate and the wage are endogenous and interact dynamically. A credit market imperfection due to limited enforcement results in credit rationing and occupational choice constraints, leading to inefficiency. Credit rationing is shown to persist as the economy develops. We also argue that wealth inequality in the above framework could be detrimental for economic development, providing a room for Pareto improving redistribution policies.
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