Equity And Efficiency Under Imperfect Credit Markets
- Topics:
- Organization
- Tags:
- Equity,
- Finance,
- Financial Services,
- Inequality,
- Investment,
- Limited Borrowing,
- University Of Zurich
- Source:
- University of Zurich
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Overview: Macroeconomic research discusses credit market imperfections as a key channel through which inequality retards growth. Limited borrowing prevents the less affluent individuals from investing the efficient amount, and the inefficiencies are considered to become stronger as inequality rises. This paper, though, argues that higher inequality may actually boost aggregate output even with convex technologies and limited borrowing. Less equality in the middle or at the top end of the distribution is associated with a lower borrowing rate and hence better access to credit for the poor. Hence, paper suggest that future empirical work on the inequality-growth nexus should use more specific measures of inequality rather than measures of "Overall" inequality such as the Gini index.
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Format: PDF | Size: 274KB | Date: Apr 2006 | Pages: 18
