Misallocation of Capital in a Model of Endogenous Financial Intermediation and Insurance
Radim Bohacek () and
Hugo Rodríguez-Mendizábal ()
Authors registered in the RePEc Author Service: Hugo Rodriguez Mendizabal ()
UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)
In this paper we analyze productivity and welfare losses from capital misallocation in a general equilibrium model of occupational choice and endogenous financial intermediation. We study the effects of borrowing and lending, insurance, and risk sharing on the optimal allocation of resources. We find that financial markets together with general equilibrium effects have large impact on entrepreneurs' entry and firm-size decisions. Efficiency gains are increasing in the quality of financial markets, particularly in their ability to alleviate a financing constraint by providing insurance against idiosyncratic risk.
Keywords: Financial markets and the macroeconomy; Occupational choice; Personal income and wealth and their distributions (search for similar items in EconPapers)
JEL-codes: E44 J24 D31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-dge and nep-ias
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Working Paper: Misallocation of Capital in a Model of Endogenous Financial Intermediation and Insurance
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:867.11
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