ON THE WELFARE AND DISTRIBUTIONAL IMPLICATIONS OF INTERMEDIATION COSTS

Tiago V de V Cavalcanti () and Anne Villamil ()

Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] from ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]

Abstract: This paper studies the distributional implications of intermediation costs. We built a "Bewley" model economy where individuals experience uninsurable idiosyncratic shocks on labor productivity and financial intermediation is costly. Individuals smooth consumption by making deposits to a financial intermediary in good times and by running down credit balances or getting loans in bad times. Higher intermediation costs (IC) increase the costs for individuals to insure against idiosyncratic shocks and to smooth consumption over time. When IC increase by a factor of 10 from its baseline value of 4% (US case), aggregate welfare decreases by less than 1% of the average consumption. For those at the bottom 1% of the wealth distribution the welfare costs are roughly 41% of their consumption, while for those at the top 1% it is -0.17%.

JEL-codes: E60 G38 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: 2005
View list of references View citations in EconPapers

Downloads: (external link)
http://www.anpec.org.br/encontro2005/artigos/A05A087.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:anp:en2005:087

Ordering information: This working paper can be ordered from
Secretaria da ANPEC Rua Tiradentes, 17 - Ingá Niterói, RJ 24210-510 Brazil

Access Statistics for this paper

More papers in Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] from ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]
Address: Secretaria da ANPEC Rua Tiradentes, 17 - Ingá Niterói, RJ 24210-510 Brazil
Contact information at EDIRC.
Series data maintained by Hugo E. A. da Gama Cerqueira (). This e-mail address is bad, please contact .