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Corruption, Credit Market Imperfections, and Economic Development

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  • António R. Antunes
  • Tiago V. de V. Cavalcanti

Abstract

This paper studies the role of credit market imperfections and corruption on the process of economic development. We address the question of how much of the differences in output per capita across countries can be attributed to differences in credit market policies and corruption. In order to accomplish that, we construct and solve numerically a general equilibrium model with heterogeneous agents, contractual imperfections and occupational choices. The quantitative exercises suggest that a country in which debt contracts are not enforced and corruption corresponds to 10% of output will be roughly 1/3 to 1/2 as rich as the United States. Though this is an important effect, it is a small fraction of the huge differences in income per capita across countries.

Suggested Citation

  • António R. Antunes & Tiago V. de V. Cavalcanti, 2003. "Corruption, Credit Market Imperfections, and Economic Development," Working Papers w200317, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w200317
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    3. Mirakhor, Abbas, 2007. "Islamic Finance and Globalization: A Convergence?," MPRA Paper 56026, University Library of Munich, Germany.
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    6. Villamil, Anne P., 2003. "Introduction to capital accumulation and allocation in economic growth," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(4), pages 583-591.

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    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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