Corruption, Credit Market Imperfections, and Economic Development

António Antunes and Tiago Cavalcanti

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper studies the role of credit market imperfections and corruption on the process of economic development. We address the question of how much of the differences in output per capita across countries can be attributed to differences in credit market policies and corruption. In order to accomplish that, we construct and solve numerically a general equilibrium model with heterogeneous agents, contractual imperfections and occupational choices. The quantitative exercises suggest that a country in which debt contracts are not enforced and corruption corresponds to 10% of output will be roughly 1/3 to 1/2 as rich as the United States. Though this is an important effect, it is a small fraction of the huge differences in income per capita across countries.

JEL-codes: E6 E64 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (6)

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Journal Article: Corruption, credit market imperfections, and economic development (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w200317

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