Suchergebnisse

AbstractCredit market imperfections typically characterize a low quality financial market, where the quality of information about borrowers is low and/or enforcement rules or institutions are not well developed. We consider an economy with credit market imperfections and analyse how changes in the degree of credit constraints affect economic fluctuations. The analysis demonstrates that if the degree of credit market imperfection is either severe or too soft, the economy converges to an asymptotically stable steady state, whereas if the degree of imperfection is moderate, the equilibrium involves deterministic cycles or chaos.

AbstractIn this paper, we develop a simple two-period model of natural capital investment under Knightian uncertainty and analyze the effects of changes in the degree of ambiguity on the optimal natural capital investment. We find that the degree of Knightian uncertainty affects a government's natural capital investment. Moreover, we find that the direction of the effect of the Knightian uncertainty depends on the nature of uncertainty, that is, on whether the uncertainty is about the future level of natural capital or about the return from saving.

Because the predicted human genetic diversity created by Ashraf and Galor (2013a; American Economic Review 103: 1–46) can be considered strictly exogenous in cross‐country growth regressions, we use it and its square as instrumental variables for corruption to investigate its impact on economic growth. Our empirical finding is that corruption has both a direct, negative impact on economic growth and an indirect, negative impact through financial development. Moreover, our evidence suggests that human genetic diversity is an origin of corruption, with a significant U‐shaped effect on corruption: when human traits are more homogeneous or more heterogeneous, corruption occurs more frequently, and when the diversity of human traits is at an intermediate level, corruption occurs less frequently. Our theoretical framework demonstrates the endogeneity problem associated with corruption, clarifying causality from financial development to corruption, and it supports empirical specifications, clarifying the channels through which corruption negatively affects economic growth.

AbstractWe demonstrate that in highly productive economies contract enforcement institutions are endogenously established, and partnership contracts correct inefficient land allocation. In less productive economies, however, such institutions are not established, and partnership contracts are not formed. In economies with intermediate productivity levels, multiple Nash equilibria exist; that is, contract enforcement institutions are established in the high Nash equilibrium whereas they are not formed in the low Nash equilibrium. In this case, institutional quality can be diverse across economies. We also prove that improvement in institutional quality reduces within‐country inequality. All these outcomes are consistent with cross‐country observations.