Wealth Distribution, Entrepreneurship and Intertemporal Trade

Sanjay Banerji and Ngo Long

CIRANO Working Papers from CIRANO

Abstract: This paper examines the pattern of intertemporal trade between countries with different distribution of wealth. We also examine the consequences of redistribution policies in this framework. The driving force of our model are risk aversion, capital market imperfections, and costs associated with default. We show that under capital market imperfections due to moral hazard, the very rich and the very poor do not undertake any risk and become passive lenders. Only individuals whose wealth lies within a medium range choose to become entrepreneurs. At any given rate of interest, a country with with a wealth distribution that is relatively less skewed to the left will have a greater supply of entrepreneurs, leading to a higher equilibrium interest rate under autarky. Hence, when the countries are opened to trade, those economies with highly skewed distribution (to the left) will become net lenders. Redistributive policies therefore will have impact on intertemporal trade. For example, if a government adopts a bail-out policy (a redistribution from successful enterpreneurs to unsuccessful ones) will increase the supply of enterpreneurs, driving up the autarkic interest rate. Consequently, a country which would be a lender if there were no bail-out policy is a net borrower under the bail-out policy. On étudie les échanges intertemporels entre deux pays ayant des distributions de richesses différentes. On montre que, à cause du risque moral et de l'imperfection du marché de capital, les gens très riches ou très pauvres choississent de ne pas devenir entrepreneurs. À un taux d'intérêt donné, le pays dont la distribution de richesse est moins égalitaire a une offre d'entrepreneurs plus élevée, ce qui lui donne, en équilibre d'autarcie, un taux d'intérêt plus élevé. Par conséquent, quand le commerce international est permis entre deux pays, celui dont la distribution de richesse est moins égalitaire deviendra le pays créditeur. Les politiques redistributives peuvent donc influencer le profil du commerce intertemporel. Par exemple, si le gouvernement d'un pays adopte une politique d'aide aux entreprises qui font faillite, l'offre d'entrepreneurs de ce pays augmentera, ce qui, à son tour, haussera le taux d'intérê}t en équilibre d'autarcie. Un pays créditeur deviendra un pays endetté quand une telle polique est introduite.

Keywords: Intertemporal trade; wealth distribution; moral hazard; prudence; imperfect capital market; entrepreneurship; Échange intertemporel; distributions des richesses; risque moral; prudence; marché de capital imparfait; entrepreneurship (search for similar items in EconPapers)
JEL-codes: F34 O15 O16 (search for similar items in EconPapers)
Date: 2001-04-01
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2001s-36

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