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Contracting Constraints, Credit Markets and Economic Development
Abhijit V. Banerjee Massachusetts Institute of Technology (MIT) - Department of Economics September 2001 MIT Dept. of Economics Working Paper No. 02-17 Abstract: This paper begins by summarizing the micro-evidence on credit markets from a large number of studies from all over the world, with the goal of identifying a number of stylized facts. We argue that, in particular, the evidence strongly suggests that for poor people in developing countries, imperfections in the credit market are quantitatively very important. We then build a simple model that explains the observed patterns, based on the idea that monitoring and screening borrowers have both fixed and variable costs. We go on to build a simple dynamic model that allows us to understand what the observations about the credit market imply for the evolution of the wealth distribution.
Keywords: Credit Markets; Distribution; Growth JEL Classifications: O12, D82, D31 Working Paper SeriesDate posted: April 25, 2002 ; Last revised: November 26, 2003Suggested CitationContact Information
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