Credit Market Imperfection, Lack of Entrepreneurship and Capital Outflow from a Developing Economy
Document Type
Research Article
Abstract
This paper explores the impact of credit market imperfection on lack of demand for capital, trade, and capital flows in an economy with wealth heterogeneity. In particular, we look at the implications of wealth heterogeneity. We show that the low return of capital and lower output of credit-intensive output in autarky may reflect lack of entrepreneurship and demand for credit due to wealth heterogeneity and eventually may lead to capital outflow from a capital-scarce country. This is a different way of echoing the sentiment of the well–known Lucas paradox, which suggests that capital might flow from the poor to the rich countries. We also show the possibility of trade and capital flow being complements and not substitutes, as is usual in standard trade models driven by factor abundance.
DOI
https://doi.org/10.1111/rode.12984
Publication Date
3-14-2023
Recommended Citation
Misra, Suryaprakash and Marjit, Sugata, "Credit Market Imperfection, Lack of Entrepreneurship and Capital Outflow from a Developing Economy" (2023). Articles. 6.
https://repository.nls.ac.in/nls_articles/6
Journal
Review of Development Economics