Credit Markets with Differences in Abilities: Education, Distribution, and Growth
36 Pages Posted: 15 Feb 2006
Date Written: April 1994
Abstract
This paper addresses the growth, welfare, and distributional effects of credit markets. We construct a general equilibrium model where human capital is the engine of growth and individuals differ in their education abilities. We argue that the existence of credit markets encourages specialization, by which individuals choose during their youth to work or to receive formal education. This specialization unambiguously increases growth and welfare. The model also shows that in economies with high (low) average level of education abilities, the opening of credit markets induces a more disperse (equal) income distribution.
JEL Classification: O15, O16, O40
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Does Corruption Affect Income Inequality and Poverty?
By Sanjeev Gupta, Hamid R. Davoodi, ...
-
Fundamental Determinants of Output Per Worker Across Countries
By Charles I. Jones and Robert E. Hall
-
How Macroeconomic Factors Affect Income Distribution: The Cross-Country Evidence
-
Inflation and Income Distribution: Further Evidence on Empirical Links
By Aleš Bulíř and Anne-marie Gulde
-
Income Distribution, Informal Safety Nets, and Social Expenditures in Uganda
-
Environmental Costs and Competitiveness. A Product-Specific Test of the Porter Hypothesis