Contracting Constraints, Credit Markets and Economic Development

Advances in Economics and Econometrics, Vol. 3, Forthcoming 2002

Posted: 26 Apr 2002

See all articles by Abhijit V. Banerjee

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

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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 Classification: O12, D82, D31

Suggested Citation

Banerjee, Abhijit V., Contracting Constraints, Credit Markets and Economic Development. Advances in Economics and Econometrics, Vol. 3, Forthcoming 2002. Available at SSRN: https://ssrn.com/abstract=309101

Abhijit V. Banerjee (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Room E52-252D
Cambridge, MA 02142
United States
617-253-8855 (Phone)
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