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Endogenous capital market imperfections, human capital, and intergenerational mobility

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  • Hidalgo Cabrillana, Ana

Abstract

In this paper, capital market imperfections are endogenized considering an adverse selection problem between banks and borrowers. We develop a growth model with linear OLG wealth dynamics, where agents are heterogeneous in terms of observable wealth and ability, which is private information. We show that banks react to this informational asymmetry by granting higher loans to talented borrowers. This, in turn, helps poor and talented agents to become educated and catch up with the rich agents. Furthermore, the credit market friction leads to greater human capital accumulation.

Suggested Citation

  • Hidalgo Cabrillana, Ana, 2009. "Endogenous capital market imperfections, human capital, and intergenerational mobility," Journal of Development Economics, Elsevier, vol. 90(2), pages 285-298, November.
  • Handle: RePEc:eee:deveco:v:90:y:2009:i:2:p:285-298
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ana Hidalgo & Amparo Castelló-Climent, 2010. "Quality and Quantity of Education in the Process of Development," 2010 Meeting Papers 238, Society for Economic Dynamics.
    2. Takashi Kamihigashi & John Stachurski, 2011. "Existence, Stability and Computation of Stationary Distributions: An Extension of the Hopenhayn-Prescott Theorem," Discussion Paper Series DP2011-32, Research Institute for Economics & Business Administration, Kobe University.
    3. Hugo Harari-Kermadec & David Flacher, 2011. "Tuition fees, self-esteem and social heterogeneity," Post-Print hal-00566151, HAL.
    4. Kamihigashi, Takashi & Stachurski, John, 2014. "Stochastic stability in monotone economies," Theoretical Economics, Econometric Society, vol. 9(2), May.
    5. Castelló-Climent, Amparo & Hidalgo-Cabrillana, Ana, 2012. "The role of educational quality and quantity in the process of economic development," Economics of Education Review, Elsevier, vol. 31(4), pages 391-409.
    6. Takashi Kamihigashi & John Stachurski, 2012. "Existence, Uniqueness and Stability of Stationary Distributions: An Extension of the Hopenhayn-Prescott Theorem," Discussion Paper Series DP2012-27, Research Institute for Economics & Business Administration, Kobe University.
    7. Takashi Kamihigashi & John Stachurski, 2011. "Stability of Stationary Distributions in Monotone Economies," ANU Working Papers in Economics and Econometrics 2011-561, Australian National University, College of Business and Economics, School of Economics.

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