Communication, commitment, and growth

Albert Marcet and Ramon Marimon

No 74, Discussion Paper / Institute for Empirical Macroeconomics from Federal Reserve Bank of Minneapolis

Abstract: We study the effect on the growth of an economy of alternative financing opportunities in a stochastic growth model with incentive constraints. Efficient accumulation mechanisms are designed and computed for economies that differ in their incentive structure. We show that when borrowing is subject to information constraints, there is a computable efficient transfer mechanism that does not affect capital accumulation and investment patterns, even though consumption patterns and the distribution of wealth are affected. In contrast, enforcement constraints can severely reduce the outside financing opportunities and affect investment patterns and economic growth. We adapt numerical algorithms for obtaining numerical solutions of these models.

Keywords: Economic; development (search for similar items in EconPapers)
Date: 1992
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Citations: View citations in EconPapers (114)

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Journal Article: Communication, commitment, and growth (1992)
Working Paper: Communication, commitment and growth (1991)
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