Financial Frictions and the Persistence of History: A Quantitative Exploration / Francisco J. Buera, Yongseok Shin.

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Buera, Francisco J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w16400.Publication details: Cambridge, Mass. National Bureau of Economic Research 2010.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We quantify the role of financial frictions and the initial misallocation of resources in explaining development dynamics. Following a reform that triggers efficient reallocation of resources, our model economy with financial frictions converges slowly to the new steady state--it takes twice as long to cover half the distance to the steady state as the neoclassical growth model. Investment rates and total factor productivity start out low and rise over time. These model dynamics are endogenously determined by the extent of initial resource misallocation and the degree of financial frictions. We present data from post-war miracle economies on the evolution of macro aggregates, factor reallocation, and establishment size distribution, which support the aggregate and micro-level implications of our theory.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w16400 (Browse shelf(Opens below))	Not For Loan

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September 2010.

We quantify the role of financial frictions and the initial misallocation of resources in explaining development dynamics. Following a reform that triggers efficient reallocation of resources, our model economy with financial frictions converges slowly to the new steady state--it takes twice as long to cover half the distance to the steady state as the neoclassical growth model. Investment rates and total factor productivity start out low and rise over time. These model dynamics are endogenously determined by the extent of initial resource misallocation and the degree of financial frictions. We present data from post-war miracle economies on the evolution of macro aggregates, factor reallocation, and establishment size distribution, which support the aggregate and micro-level implications of our theory.