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Financial Imperfections, Inequality and Capital Accumulation

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  • Mahmoud Sami Nabi

    ()
    (LEGI – Tunisia Polytechnic School and University of Sousse - IHEC)

Abstract

Aghion, P. and P. Bolton (1997, "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, 59, 151-172) provide a model analyzing the effect of capital accumulation on income inequality. We integrate two additional features to a modified version of this model. The first one is a costly financial contract enforcement which represents the second type of credit market imperfection in addition to moral hazard. The second one is enabling wealthy agents to undertake larger investment projects relatively to other agents. I show that inequality increases in a first stage of development and, contrarily to Aghion and Bolton (1997), remains constant or increases in a second stage (depending on the deposit interest rate ceiling).

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P84.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 3 ()
Pages: 2388-2403

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Handle: RePEc:ebl:ecbull:eb-09-00276

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Related research

Keywords: Financial imperfections; inequality; capital accumulation.;

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  1. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  2. Laeven, Luc & Majnoni, Giovanni, 2003. "Does judicial efficiency lower the cost of credit:," Policy Research Working Paper Series 3159, The World Bank.
  3. Bertola, Giuseppe, 1991. "Factor Shares and Savings In Endogenous Growth," CEPR Discussion Papers 576, C.E.P.R. Discussion Papers.
  4. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  5. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  6. Banerjee, Abhijit V. & Duflo, Esther, 2005. "Growth Theory through the Lens of Development Economics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552 Elsevier.
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Cited by:
  1. Nabi, Mahmoud Sami, 2012. "Profit Sharing, Income Inequality and Capital Accumulation," MPRA Paper 49830, University Library of Munich, Germany.

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