A NOTE ON CREDIT MARKET DEVELOPMENT AND HUMAN CAPITAL ACCUMULATION

This paper explores the interplay between credit market development and human capital accumulation in a two-period overlapping-generations economy with asymmetric information under the assumption that young lenders channel credits to young borrowers and acquire education. We find that, at the self-s...

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Bibliographic Details
Published in:Macroeconomic dynamics 2013-10, Vol.17 (7), p.1525-1541
Main Author: Ho, Wai-Hong
Format: Article
Language:English
Subjects:
Bond markets
Consumer credit
Consumption
Economic growth
Economic models
Economic statistics
Economic theory
Education
Equilibrium
Growth models
Human capital
Macroeconomics
Studies
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Summary:This paper explores the interplay between credit market development and human capital accumulation in a two-period overlapping-generations economy with asymmetric information under the assumption that young lenders channel credits to young borrowers and acquire education. We find that, at the self-selection equilibrium, lenders will allocate more time to acquire education if the cost of screening borrowers falls. Furthermore, a longer duration of lenders' schooling time suppresses borrowers' incentive to cheat thereby enabling lenders to screen less frequently. Our preliminary cross-country empirical analysis appears to support these findings.
ISSN:1365-1005
1469-8056
DOI:10.1017/S1365100512000156