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Imperfect Credit Markets, Household Wealth Distribution, and Development

Author

Listed:
  • Kiminori Matsuyama

    (Department of Economics, Northwestern University, Evanston, Illinois 60208-2600)

Abstract

This article discusses some key results in the theoretical literature on credit market imperfections, household wealth distribution, and development by conducting three types of analysis, which progressively build on one another. The first, a single dynasty model, explains how a household may be caught in a poverty trap because of credit market imperfections but says little about the effects of distribution on development. The second, a model of interacting dynasties with a fixed threshold, explains a collective poverty trap, with path dependence in the wealth distribution dynamics, but says little about the effects of inequality on development, owing to its absolute notion of the rich and the poor. The third, models of interacting dynasties with variable thresholds, offers a richer framework for understanding the dynamics of inequality and development under credit market imperfections, owing to its relative notion of the rich and poor.

Suggested Citation

  • Kiminori Matsuyama, 2011. "Imperfect Credit Markets, Household Wealth Distribution, and Development," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 339-362, September.
    • Handle: RePEc:anr:reveco:v:3:y:2011:p:339-362
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-111809-125054
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    Citations

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    Cited by:

    1. Marcos Gómez & Francisco Parro, 2018. "The Fundamental Contradiction Of Capitalism Revisited," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 381-399, October.
    2. Duong, Tran Lam Anh, 2013. "An Analysis of Changes in Wealth Distribution upon the Entrance of Foreign Direct Investment Firms," Discussion Papers 2013-09, Graduate School of Economics, Hitotsubashi University.
    3. Carter, Michael & Morrow, John, 2014. "The political economy of inclusive rural growth," LSE Research Online Documents on Economics 60268, London School of Economics and Political Science, LSE Library.
    4. Coco, Giuseppe & Pignataro, Giuseppe, 2014. "The poor are twice cursed: Wealth inequality and inefficient credit market," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 149-159.
    5. Schwab, Jakob, 2013. "Throwing the Spanner in the Works: The Mixed Blessing of FDI," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80020, Verein für Socialpolitik / German Economic Association.
    6. Yuichiro Matsumoto, 2014. "Inverted u-shaped relationship between inequality and economic performance," Discussion Papers in Economics and Business 14-19, Osaka University, Graduate School of Economics.
    7. Markus Brueckner & Tomoo Kikuchi & George Vachadze, 2016. "Effects of Income Growth on Domestic Saving Rates: The Role of Poverty and Borrowing Constraints," ANU Working Papers in Economics and Econometrics 2016-636, Australian National University, College of Business and Economics, School of Economics.
    8. Bowden, Roger J. & Posch, Peter N. & Ullmann, Daniel, 2018. "Income distribution in troubled times: Disadvantage and dispersion dynamics in Europe 2005–2013," Finance Research Letters, Elsevier, vol. 25(C), pages 36-40.
    9. Unel, Bulent, 2018. "Offshoring and unemployment in a credit-constrained economy," Journal of International Economics, Elsevier, vol. 111(C), pages 21-33.
    10. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2020. "Taking Stock of the Evidence on Microfinancial Interventions," Review, Federal Reserve Bank of St. Louis, vol. 102(2), pages 173-202, May.
    11. Supreet Kaur & Sendhil Mullainathan & Suanna Oh & Frank Schilbach, 2021. "Do Financial Concerns Make Workers Less Productive?," Working Papers 2021-07, Becker Friedman Institute for Research In Economics.
    12. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2015. "Entrepreneurship and Financial Frictions: A Macrodevelopment Perspective," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 409-436, August.
    13. Anyanwu, Ugochukwu Michael & Anyanwu, Amarachukwu Anthony & Cieślik, Andrzej, 2021. "Does abundant natural resources amplify the negative impact of income inequality on economic growth?," Resources Policy, Elsevier, vol. 74(C).
    14. Marcello D’Amato & Christian Pietro, 2014. "Occupational mobility and wealth evolution in a model of educational investment with credit market imperfections," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(1), pages 73-98, March.
    15. Pham, Chau, 2021. "Intergenerational human capital,risk aversion, and the poverty trap," Warwick-Monash Economics Student Papers 28, Warwick Monash Economics Student Papers.

    More about this item

    Keywords

    inequality and growth; individual versus collective poverty traps; path dependence; trickle down; symmetry breaking; emergent versus dissipating class structures;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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