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Credit Markets with Differences in Abilities: Education, Distribution, and Growth
Author:
Mr. Jose De Gregorio null

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Mr. Se-Jik Kim
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Series:
IMF Working Papers
Volume/Issue:
Volume 1994: Issue 047
Language:
English
Publication Date:
01 Apr 1994
DOI:
https://doi.org/10.5089/9781451972962.001
ISBN:
9781451972962
ISSN:
1018-5941
Pages:
36
Keywords:
WP; economic growth
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund