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Bridging the Gaps: Credits, Adoption, and Inequality

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  • MARIA ELISA FARIAS
  • JAVIER SCAVIA
  • RAÚL FUENTES

Abstract

We examine here the role of credits on technology adoption and inequality from the perspective of developing countries. Utilizing a model of exogenous growth, with heterogeneous labor and technical progress embodied in physical capital, we find that credits can contribute to a faster adoption and to reducing income inequality. Thus, a virtuous cycle of credits, a shorter technological gap, less inequality, and economic growth is feasible to be created when there is full liquidity in the market. When credits are constrained, the cycle loses virtuosity, where the economy can lose up to two points in growth due to credit constraints.

Suggested Citation

  • Maria Elisa Farias & Javier Scavia & Raúl Fuentes, 2019. "Bridging the Gaps: Credits, Adoption, and Inequality," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(5), pages 1355-1401, August.
  • Handle: RePEc:wly:jmoncb:v:51:y:2019:i:5:p:1355-1401
    DOI: 10.1111/jmcb.12549
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    File URL: https://doi.org/10.1111/jmcb.12549
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    Cited by:

    1. Anna Samarina & Anh D.M. Nguyen, 2019. "Does monetary policy affect income inequality in the euro area?," Bank of Lithuania Working Paper Series 61, Bank of Lithuania.

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