The empirical literature on the relationship between inequality and growth offers a contradictory assessment: Estimators based on time-series variation indicate a positive link while estimators (also) exploiting the cross-sectional variation suggest a negative relationship. The present paper (i)...

We explore the role of the ownership structure of capital in an economy that suffers from barriers to entry and an imperfect financial system. In such an environment, an unequal distribution of capital provides an explanation for trade flows and trade gains even when countries do not differ in...

We explore the impact of non-collusive corruption on factor rewards and on the wealth distribution. We show that the distributional consequences depend crucially on the degree of capital market imperfections. With perfect capital markets, corruption does not redistribute wealth within the...

This paper introduces credit market imperfections and barriers to entrepreneurship into the Ramsey 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 such...

Relying on a simple endogenous growth model, this paper highlights a political instability effect as a potential explanation for why foreign aid is frequently ineffective with respect to economic performance. In the present framework, the role of the state is to fund institutions allowing for...

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...