Financial infrastructure, technological shift, and inequality in economic development
AbstractThis paper presents an overlapping generations model with technology choice and imperfect financial markets, and examines the evolution of income distribution in economic development. The model shows that improvements in financial infrastructure facilitate economic development both by raising the aggregate capital-labor ratio and by causing a technological shift to more capital-intensive technologies. While a higher capital-labor ratio under a given technology reduces inequality, a technological shift can lead to a concentration of the economic rents among a smaller number of agents. We derive the condition under which an improvement in financial infrastructure actually decreases the average utility of agents.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 7919.
Date of creation: 22 Mar 2008
Date of revision:
Technological Shift; Income Distribution; Rents; Enforcement; Credit Rationing;
Other versions of this item:
- Horii, Ryo & Ohdoi, Ryoji & Yamamoto, Kazuhiro, 2013. "Financial Infrastructure, Technological Shift, And Inequality In Economic Development," Macroeconomic Dynamics, Cambridge University Press, vol. 17(03), pages 531-562, April.
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-15 (All new papers)
- NEP-DEV-2008-04-15 (Development)
- NEP-DGE-2008-04-15 (Dynamic General Equilibrium)
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