Limited Enforcement, Financial Intermediation, and Economic Development: A Quantitative Assessment

27 Pages Posted: 10 Aug 2010

See all articles by Pedro S. Amaral

Pedro S. Amaral

California State University, Fullerton - Department of Economics

Erwan Quintin

Federal Reserve Bank of Dallas

Abstract

We present a model of economic development where the importance of financial differences caused by limited enforcement can be measured. Economies where enforcement is poor direct less capital to the production sector and employ less efficient technologies. Calibrated simulations reveal that the resulting effect on output is large. Furthermore, the model correctly predicts that the average scale of production should rise with the quality of enforcement. Finally, we find that the importance of limited enforcement rises with the importance of capital in production.

Suggested Citation

Amaral, Pedro S. and Quintin, Erwan, Limited Enforcement, Financial Intermediation, and Economic Development: A Quantitative Assessment. International Economic Review, Vol. 51, No. 3, pp. 785-811, August 2010, Available at SSRN: https://ssrn.com/abstract=1654638 or http://dx.doi.org/10.1111/j.1468-2354.2010.00601.x

Pedro S. Amaral (Contact Author)

California State University, Fullerton - Department of Economics ( email )

Fullerton, CA 92834
United States

Erwan Quintin

Federal Reserve Bank of Dallas ( email )

PO Box 655906
Dallas, TX 75265-5906
United States

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