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Inequality and Private Credit

Author

Listed:
  • Fischer, Ronald

    (University of Chile)

  • Huerta, Diego

    (Central Bank of Chile)

  • Valenzuela, Patricio

    (University of Chile)

Abstract

This article examines whether the direction of the effect of inequality on private credit depends on the capital constraints of individual countries, as predicted by Balmaceda and Fischer (2010). Consistent with the model's predictions, we find that greater income inequality leads to a higher ratio of private credit to GDP in economies with low incomes and weak legal rights, whereas the reverse is true in economies with high incomes and strong legal rights.

Suggested Citation

  • Fischer, Ronald & Huerta, Diego & Valenzuela, Patricio, 2015. "Inequality and Private Credit," Working Papers 15-12, University of Pennsylvania, Wharton School, Weiss Center.
  • Handle: RePEc:ecl:upafin:15-12
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    File URL: http://fic.wharton.upenn.edu/fic/papers/15/p1512.html
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    References listed on IDEAS

    as
    1. Sofia Bauducco & Alexandre Janiak, 2012. "Minimum wages strike back: the effects on capital and labor demands in a large-firm framework," Documentos de Trabajo 287, Centro de Economía Aplicada, Universidad de Chile.
    2. Eduardo Engel & Ronald Fischer & Alexander Galetovic & Manuel Hermosilla, 2009. "Renegociación de concesiones en Chile," Documentos de Trabajo 262, Centro de Economía Aplicada, Universidad de Chile.
    3. Matteo Triossi & Patricio Valdivieso & Benjamín Villena-Roldán, 2013. "A Spatial Model of Voting with Endogenous Proposals: Theory and Evidence from Chilean Senate," Documentos de Trabajo 294, Centro de Economía Aplicada, Universidad de Chile.
    4. Felipe Balmaceda & Ronald Fischer, 2010. "Economic performance, creditor protection, and labour inflexibility," Oxford Economic Papers, Oxford University Press, vol. 62(3), pages 553-577, July.
    5. Andreasen, Eugenia & Schindler, Martin & Valenzuela, Patricio, 2015. "Capital Controls and the Cost of Debt," Working Papers 15-02, University of Pennsylvania, Wharton School, Weiss Center.
    6. Matteo Triossi, 2014. "Assessing the extent of democratic failures. A 99%-Condorcet’s Jury Theorem," Documentos de Trabajo 306, Centro de Economía Aplicada, Universidad de Chile.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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