Equitable Redistribution And Inefficiency Under Credit Rationing

Co-authors: Hamid Beladi, Sugata Marjit, Reza Oladi

It has been argued in many policy circles that lack of access to credit by the poor may be a source of inefficiency in developing economies. Then, conventional wisdom may suggest that asset redistribution from the rich to the poor improves efficiency. In contrast, we develop a general equilibrium model with credit market and show that such an egalitarian redistribution of assets may indeed lead to inefficiency.

Views expressed in this article are solely those of the author and do not reflect the opinion or stand of the University.