Credit Markets with Differences in Abilities : Education, Distribution, and Growth

Author/Editor:

Jose De Gregorio ; Se-Jik Kim

Publication Date:

April 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 94/47

English

Publication Date:

April 1, 1994

ISBN/ISSN:

9781451972962/1018-5941

Stock No:

WPIEA0471994

Format:

Paper

Pages:

36

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