This paper introduces credit market imperfections and barriers to entrepreneurship into the neoclassical growth model. It is assumed that only a small elite, the oligarchs, may run firms and that these oligarchs - when borrowing from workers - may renege on the debt contracts at low cost. In...

Recent macroeconomic research discusses credit market imperfections as a key channel through which inequality retards growth. Limited borrowing prevents the less affluent individuals from investing the efficient amount, and the inefficiencies are considered to become stronger as inequality...