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

53 Pages Posted: 9 Nov 2013 Last revised: 6 Aug 2014

See all articles by Benjamin Moll

Benjamin Moll

Princeton University - Department of Economics

Robert M. Townsend

Massachusetts Institute of Technology (MIT)

Victor Zhorin

Computation Institute

Date Written: November 2013

Abstract

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.

Suggested Citation

Moll, Benjamin and Townsend, Robert M. and Zhorin, Victor, Economic Development, Flow of Funds and the Equilibrium Interaction of Financial Frictions (November 2013). NBER Working Paper No. w19618. Available at SSRN: https://ssrn.com/abstract=2352135

Benjamin Moll (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Robert M. Townsend

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Victor Zhorin

Computation Institute ( email )

5735 South Ellis Avenue
Searle Chemistry Laboratory
Chicago, IL 60637
United States

HOME PAGE: http://home.uchicago.edu/~vzhorin/

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