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Payment instruments, finance and development

Thorsten Beck (), Haki Pamuk, Ravindra Ramrattan and Burak Uras ()

Journal of Development Economics, 2018, vol. 133, issue C, 162-186

Abstract: This paper studies the effects of a payment technology innovation (mobile money) on entrepreneurship and economic development in a quantitative dynamic general equilibrium model. In the model mobile money dominates fiat money as a medium of exchange, since it avoids the risk of theft, but comes with electronic transaction costs. We show that entrepreneurs with higher productivity and access to trade credit are more likely to adopt mobile money as a payment instrument vis-a-vis suppliers. Calibrating the stationary equilibrium of the model to match firm-level data from Kenya, we show significant quantitative implications of mobile money for entrepreneurial growth and macroeconomic development.

Keywords: Payment technologies; Theft; Trade credit; Allocations (search for similar items in EconPapers)
JEL-codes: D14 G21 O12 O16 (search for similar items in EconPapers)
Date: 2018
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