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Corruption, credit market imperfections, and economic development

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  • Antunes, Antonio R.
  • Cavalcanti, Tiago V.

Abstract

This paper studies the role of credit market imperfections and corruption on the process of economic development. We address the question of how much of the differences in output per capita across countries can be attributed to differences in credit market policies and corruption. In order to accomplish that, we construct and solve numerically a general equilibrium model with heterogeneous agents, contractual imperfections and occupational choices. The quantitative exercises suggest that a country in which debt contracts are not enforced and corruption corresponds to 10% of output will be roughly 1/3 to 1/2 as rich as the United States. Though this is an important effect, it is a small fraction of the huge differences in income per capita across countries.

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Bibliographic Info

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 43 (2003)
Issue (Month): 4 ()
Pages: 627-642

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Handle: RePEc:eee:quaeco:v:43:y:2003:i:4:p:627-642

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Web page: http://www.elsevier.com/locate/inca/620167

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  1. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
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  8. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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  12. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
  13. John Laitner & F. Thomas Juster, 1993. "New evidence on altruism: a study of TIAA-CREF retirees," Discussion Paper / Institute for Empirical Macroeconomics 86, Federal Reserve Bank of Minneapolis.
  14. Quadrini, Vincenzo, 1999. "The Importance of Entrepreneurship for Wealth Concentration and Mobility," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 1-19, March.
  15. Erwan Quintin, 2001. "Limited enforcement and the organization of production," Center for Latin America Working Papers 0601, Federal Reserve Bank of Dallas.
  16. Lloyd-Ellis, Huw & Bernhardt, Dan, 2000. "Enterprise, Inequality and Economic Development," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 147-68, January.
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Cited by:
  1. Mirakhor, Abbas, 2007. "Islamic Finance and Globalization: A Convergence?," MPRA Paper 56026, University Library of Munich, Germany.
  2. Villamil, Anne P., 2003. "Introduction to capital accumulation and allocation in economic growth," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 583-591.
  3. Antunes, Antonio R. & Cavalcanti, Tiago V. de V., 2007. "Start up costs, limited enforcement, and the hidden economy," European Economic Review, Elsevier, vol. 51(1), pages 203-224, January.

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