We review both the theoretical and empirical literature on entrepreneurship and financial frictions, with an emphasis on the heterogeneous and dynamic micro-level implications of financial frictions for macro development

We provide a quantitative evaluation of the aggregate and distributional impact of microfinance or credit programs targeted toward small businesses. We find that the redistributive impact of microfinance is stronger in general equilibrium than in partial equilibrium, but the impact on aggregate...

We review the empirical evidence on microfinance and asset grants to the ultra poor or microentrepreneurs, and assess our ability to account for this evidence using quantitative theory. Properly executed, these interventions can help segments of the population increase their income and...

Why don't poor countries adopt more productive technologies? Is there a role for policies that coordinate technology adoption? To answer these questions, we develop a quantitative model that features complementarity in firms' technology adoption decisions: The gains from adoption are larger when...

What are the effects of a temporary lockdown of the economy? Do firms' deteriorating balance sheets and labor market frictions propagate and prolong the effects? We answer these questions in a model with financial and labor market frictions. The model makes quantitative predictions about the...

We quantify the role of financial frictions and the initial misallocation of resources in explaining development dynamics. Following a reform that triggers efficient reallocation of resources, our model economy with financial frictions converges slowly to the new steady state--it takes twice as...

Why doesn't capital flow into fast-growing countries? In this paper, we provide a quantitative framework incorporating heterogeneous producers and underdeveloped domestic financial markets to study the joint dynamics of total factor productivity (TFP) and capital flows. When an unexpected...

Income differences across countries primarily reflect differences in total factor productivity (TFP). More disaggregated data show that the TFP gap between rich and poor countries varies systematically across industrial sectors of the economy: Poor countries are particularly unproductive in...

Why are financial crises associated with a sustained rise in unemployment? We develop a tractable model with frictions in both credit and labor markets to study the aggregate and micro-level implications of a credit crunch--i.e., a tightening of collateral constraints. When we simulate a credit...

Standard dynamic models of structural transformation, without knife-edge and counterfactual parameter values, preclude balanced growth path (BGP) analysis. This paper develops a dynamic equilibrium concept for a more general class of models -- an alternative to a BGP, which we coin a Stable...