The Politics of Financial Development and Capital Accumulation

Tarishi Matsuoka, Katsuyuki Naito and Keigo Nishida

No 793, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper proposes a model to examine conditions in which a government policy to improve imperfect credit markets is practiced through a democratic political process, and analyzes interactions between the politically implemented policy and economic development. The policy increases the welfare of middle-income individuals who can start new investments at the expense of poor and rich individuals. The preferences for the policy are thus non-monotonic over income levels. The realization of the policy strongly depends on the level of capital and the extent of income inequality. The low level of capital and high income inequality make the policy hard to implement, which is likely to cause the economy to fall into a poverty trap.

Keywords: Keywords: financial development; economic development; income inequality; majority voting (search for similar items in EconPapers)
JEL-codes: D72 G18 O11 O15 O16 (search for similar items in EconPapers)
Pages: 28pages
Date: 2011-11
New Economics Papers: this item is included in nep-pol
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http://www.kier.kyoto-u.ac.jp/DP/DP793.pdf (application/pdf)

Related works:
Journal Article: THE POLITICS OF FINANCIAL DEVELOPMENT AND CAPITAL ACCUMULATION (2019)
Working Paper: The Politics of Financial Development and Capital Accumulation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:793

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