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Economic Development, Flow of Funds and the Equilibrium Interaction of Financial Frictions

  • Benjamin Moll
  • Robert M. Townsend
  • Victor Zhorin

We use a variety of different data sets from Thailand to study not only the extremes of micro and macro variables but also within-country flow of funds and labor migration. We develop a general equilibrium model that encompasses regional variation in the type of financial friction and calibrate it to measured variation in regional aggregates. The model predicts substantial capital and labor flows from rural to urban areas even though these differ only in the underlying financial regime. Predictions for micro variables not used directly provide a model validation. Finally we estimate the impact of a policy counterfactual, regional isolationism.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19618.

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Date of creation: Nov 2013
Handle: RePEc:nbr:nberwo:19618
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  9. Benjamin Moll, 2014. "Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?," American Economic Review, American Economic Association, vol. 104(10), pages 3186-3221, October.
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  14. Thomas Piketty, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 173-189.
  15. Alexander Karaivanov & Robert M. Townsend, 2013. "Dynamic Financial Constraints: Distinguishing Mechanism Design from Exogenously Incomplete Regimes," NBER Working Papers 19617, National Bureau of Economic Research, Inc.
  16. Anna L. Paulson & Robert M. Townsend & Alexander Karaivanov, 2006. "Distinguishing Limited Liability from Moral Hazard in a Model of Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 114(1), pages 100-144, February.
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  18. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
  19. Ethan Ligon, 1998. "Risk Sharing and Information in Village Economies," Review of Economic Studies, Oxford University Press, vol. 65(4), pages 847-864.
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  22. Robert Shimer, 2010. "Labor Markets and Business Cycles," Economics Books, Princeton University Press, edition 1, number 9217.
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