(Non-Monotonic) Effects of Productivity and Credit Constraints on Equilibrium Aggregate Production in General Equilibrium Models with Heterogeneous Producers

Ngoc-Sang Pham

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Abstract: In a market economy, the aggregate production level depends not only on the aggregate variables but also on the distribution of individual characteristics (e.g., productivity, credit limit, ...). We point out that, due to financial frictions, the equilibrium aggregate production may be non-monotonic in both individual productivity and credit limit. We provide conditions under which this phenomenon happens. By consequence, improving productivity or relaxing credit limit of firms may not necessarily be beneficial to economic development.

Keywords: financial shock; credit constraint; heterogeneity; productivity dispersion; distributional effects; efficiency; general equilibrium (search for similar items in EconPapers)
Date: 2025-01-21
Note: View the original document on HAL open archive server: https://hal.science/hal-04901381v1
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Working Paper: (Non-Monotonic) Effects of Productivity and Credit Constraints on Equilibrium Aggregate Production in General Equilibrium Models with Heterogeneous Producers (2025)
Working Paper: (Non-Monotonic) Effects of Productivity and Credit Constraints on Equilibrium Aggregate Production in General Equilibrium Models with Heterogeneous Producers (2025)
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