Savings, Growth and Capital Markets Imperfections: The Case of Borrowing Constraints

March 1, 1993

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 studies the effects that borrowing constraints have on savings and growth and argues that, though they increase savings, their effect on growth is ambiguous. Empirical evidence on the extent of borrowing constraints as well as savings, investment, human capital accumulation and growth performance for industrialized countries is presented. A simple model to show the effects of borrowing constraints on savings is developed. Then the model is extended to analyze the effects of borrowing constraints on human capital accumulation and growth. It is shown that borrowing constraints increase savings, but reduce human capital accumulation.

Subject: Capital accumulation, Capital markets, Consumption, Financial markets, Human capital, Income, Labor, National accounts

Keywords: Capital accumulation, capital market, capital market imperfection, Capital markets, Consumption, first period savings, flat incomes profile, generation saving, growth from Modigliani, Human capital, Income, interest rate, mortgage market, physical capital, rate of an economy, savings data, savings literature, savings performance, savings rate, WP

Pages:
34
Volume:
1993
DOI:
https://doi.org/10.5089/9781451844979.001
Issue:
031
Series:
Working Paper No. 1993/031
Stock No:
WPIEA0311993
ISBN:
9781451844979
ISSN:
1018-5941

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