Following conventional wisdom, capital market imperfections are
considered to be an obstacle to long-run growth and prosperity. In
this paper a simple extension to the work of Galor and Zeira (1993)
provides a caveat to this rule of thumb. Admitting lotteries the dynamics
of the model changes fundamentally: the poverty trap found in
the original work vanishes for a wide class of parameters. It turns out
that reducing credit market imperfections does not improve long run
growth perspectives in general. In some cases this creates a poverty
trap and persistent income inequality in the economy.
Dieser Eintrag ist Teil der Universitätsbibliographie.
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