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Cost of Enforcement in Developing Countries with Credit Market Imperfection

Author

Listed:
  • Munetomo Ando

    (National Graduate Institute for Policy Studies)

  • Noriyuki Yanagawa

    (Faculty of Economics, The University of Tokyo)

Abstract

This paper examines development processes of a country when the degree of verifiability is endogenously determined. We characterize the development processes rigorously and show that although the efforts for improving of verifiability are important, the income distribution of a country is crucial for the effectiveness of efforts to the development processes. Moreover, this paper explains the situation where one country shows high growth rates temporally even if the technology of enforcement is poor, but eventually it experiences economic collapses.

Suggested Citation

  • Munetomo Ando & Noriyuki Yanagawa, 2004. "Cost of Enforcement in Developing Countries with Credit Market Imperfection," CARF F-Series CARF-F-004, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  • Handle: RePEc:cfi:fseres:cf004
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    File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/12.pdf
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    References listed on IDEAS

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    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    2. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
    3. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
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    Cited by:

    1. Kerstin Gerling, 2008. "The Real Consequences of Financial Market Integration when Countries Are Heterogeneous," Working Papers 141, Oesterreichische Nationalbank (Austrian Central Bank).
    2. Ryo Horii & Ryoji Ohdoi & Kazuhiro Yamamoto, 2005. "Finance, Technology and Inequality in Economic Development," Development and Comp Systems 0504004, EconWPA, revised 31 Jul 2005.
    3. Kiminori Matsuyama, 2005. "Credit Market Imperfections and Patterns of International Trade and Capital Flows," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 714-723, 04/05.
    4. Kiminori Matsuyama, 2004. "Financial Market Globalization, Symmetry-Breaking, and Endogenous Inequality of Nations," Econometrica, Econometric Society, vol. 72(3), pages 853-884, May.

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