Center for Economic Research, Department of Economics, University of Minnesota
This paper presents a dynamic general equilibrium model to investigate the interaction of financial
markets with economic growth, change of industry structure and the evolution of wealth across
households along the development process. I find that in the early stages of development the
economy experiences "extensive growth," in which the growth rates are increasing and the
fraction of entrepreneurs is positively correlated to the level of aggregate output. The engine of
growth in this stage comes from the reallocation of resources from low to high productivity
sectors. In the middle and mature stages of development the economy experiences "intensive
growth," that is, the fraction of entrepreneurs is negatively correlated with the level of output and
the source of growth in these stages is the higher average productivity achieved by the
competition among entrepreneurs. As a result, the growth rate could be increasing in the middle
stage and then displays a decreasing pattern during the mature stage.
Carranza, L., (1995), "Credit Imperfections, Inequality and Economic Growth", Discussion Paper No. 286, Center for Economic Research, Department of Economics, University of Minnesota.
Credit Imperfections, Inequality and Economic Growth.
Center for Economic Research, Department of Economics, University of Minnesota.
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