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Credit Markets with Differences in Abilities: Education, Distribution, and Growth

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  • De Gregorio, Jose
  • Kim, Se-Jik

Abstract

This article presents an endogenous growth model in which credit markets affect time allocation of individuals with different educational abilities. Credit markets allow the more able to specialize in studying and the less able to specialize in working. This specialization can increase growth and welfare. This article also shows that in economies with high (low) levels of education abilities, the opening of credit markets induces a more disperse (equal) income distribution. The role of intergenerational transfers in overcoming the absence of credit markets is also discussed, as well as other forms of credit markets imperfections. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 41 (2000)
Issue (Month): 3 (August)
Pages: 579-607

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Handle: RePEc:ier:iecrev:v:41:y:2000:i:3:p:579-607

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References

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  1. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  2. Nancy L. Stokey, 1990. "Human Capital, Product Quality, and Growth," Discussion Papers 883, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Galor, O. & Tsiddon, D., 1996. "The Distribution of Human Capital and Economic Growth," Papers 18-96, Tel Aviv - the Sackler Institute of Economic Studies.
  4. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  5. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 49-71, February.
  6. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers 73, China Economics and Management Academy, Central University of Finance and Economics.
  7. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
  8. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  9. De Gregorio, Jose & Guidotti, Pablo E., 1995. "Financial development and economic growth," World Development, Elsevier, vol. 23(3), pages 433-448, March.
  10. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 195-209, April.
  11. Greenwood, Jeremy & Smith, Bruce D., 1997. "Financial markets in development, and the development of financial markets," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 145-181, January.
  12. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  14. Saint-Paul, Gilles, 1992. "Technological choice, financial markets and economic development," European Economic Review, Elsevier, vol. 36(4), pages 763-781, May.
  15. Guiso, Luigi & Jappelli, Tullio, 1991. "Intergenerational transfers and capital market imperfections : Evidence from a cross-section of Italian households," European Economic Review, Elsevier, vol. 35(1), pages 103-120, January.
  16. Laitner, John, 1993. "Long-run equilibria with borrowing constraints and altruism," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 65-96.
  17. Behrman, Jere R & Pollak, Robert A & Taubman, Paul, 1989. "Family Resources, Family Size, and Access to Financing for College Education," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 398-419, April.
  18. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  19. Perotti, Roberto, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 755-76, October.
  20. Atkinson, A-B, 1996. "Bringing Income Distribution in from the Cold," Economics Papers 117, Economics Group, Nuffield College, University of Oxford.
  21. Kim, Se-Jik & Kim, Yong Jin, 2000. "Growth gains from trade and education," Journal of International Economics, Elsevier, vol. 50(2), pages 519-545, April.
  22. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
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Cited by:
  1. Alex Trew, 2005. "Finance and Growth: A Critical Survey," CDMA Working Paper Series 200507, Centre for Dynamic Macroeconomic Analysis, revised 15 Apr 2006.
  2. Ryo Horii & Akiomi Kitagawa & Koichi Futagami, 2003. "Availability of Higher Education and Long-Term Economic Growth," Discussion Papers in Economics and Business 03-14-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Sep 2005.
  3. Theodore Palivos & Dimitrios Varvarigos, 2013. "Intergenerational Complementarities in Education, Endogenous Public Policy, and the Relation Between Growth and Volatility," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(2), pages 249-272, 04.
  4. de la CROIX, David & LUBRANO, Michel, 2009. "The tradeoff between growth and redistribution: ELIE in an overlapping generations model," CORE Discussion Papers 2009018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Papagni, Erasmo, 2008. "The Long-run Effects of Household Liquidity Constraints and Taxation on Fertility, Education, Saving and Growth," MPRA Paper 12793, University Library of Munich, Germany.
  6. Conceição Pereira, 2003. "The Effects of Households’ and Firms’ Borrowing Constraints on Economic Growth," GEMF Working Papers 2003-04, GEMF - Faculdade de Economia, Universidade de Coimbra.
  7. DE LA CROIX, David & MICHEL, Philippe, . "Education and growth with endogenous debt constraints," CORE Discussion Papers RP -1991, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. AZARIADIS, Costas & de la CROIX, David, 2002. "Growth or equality ? Losers and gainers from financial reform," CORE Discussion Papers 2002058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Das, Satya P., 2006. "Trade, skill acquisition and distribution," Journal of Development Economics, Elsevier, vol. 81(1), pages 118-141, October.

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