Optimal Growth Policies in a Two-Sector Model with Financial Market Imperfections

Quoc Hung Nguyen

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the pro-growth policies in an endogenous growth model where heterogeneous entrepreneurs face collateral constraints, skilled workers accumulate human capital, and the government intervenes to promote human and physical capital formation. It shows that the model has a balanced-growth path whose rate depends on government policy and financial development level. The theoretical analysis also shows that when the distribution of idiosyncratic productivity is heavy-tailed, the government must subsidize productive entrepreneurs to achieve optimal pro-growth policies.

Keywords: Heterogeneity; Financial Deepening; Growth Policies (search for similar items in EconPapers)
JEL-codes: E10 E22 E44 O16 (search for similar items in EconPapers)
Date: 2018-09-08
New Economics Papers: this item is included in nep-ent, nep-fdg, nep-gro and nep-mac
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https://mpra.ub.uni-muenchen.de/95828/9/MPRA_paper_95828.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:88952

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