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Corruption, Credit Market Imperfections, and Economic Development

  • António R. Antunes
  • Tiago V. de V. Cavalcanti

This paper studies the role of credit market imperfections and corruption on the process of economic development. We address the question of how much of the differences in output per capita across countries can be attributed to differences in credit market policies and corruption. In order to accomplish that, we construct and solve numerically a general equilibrium model with heterogeneous agents, contractual imperfections and occupational choices. The quantitative exercises suggest that a country in which debt contracts are not enforced and corruption corresponds to 10% of output will be roughly 1/3 to 1/2 as rich as the United States. Though this is an important effect, it is a small fraction of the huge differences in income per capita across countries.

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File URL: https://www.bportugal.pt/en-US/BdPPublicationsResearch/WP200317.pdf
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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w200317.

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Date of creation: 2003
Handle: RePEc:ptu:wpaper:w200317
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  1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
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  9. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
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  11. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  12. William Easterly & Sergio Rebelo, 1993. "Fiscal Policy and Economic Growth: An Empirical Investigation," NBER Working Papers 4499, National Bureau of Economic Research, Inc.
  13. Hopenhayn, Hugo A & Prescott, Edward C, 1992. "Stochastic Monotonicity and Stationary Distributions for Dynamic Economies," Econometrica, Econometric Society, vol. 60(6), pages 1387-406, November.
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  16. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
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