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Economic development, flow of funds, and the equilibrium interaction of financial frictions

We use a variety of different datasets from Thailand to study not only the extremes of micro and macro variables but also within-country flow of funds and labor migration. We develop a general equilibrium model that encompasses regional variation in the type of financial friction and calibrate it to...

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Bibliographic Details
Published in:Proceedings of the National Academy of Sciences - PNAS 2017-06, Vol.114 (24), p.6176-6184
Main Authors: Moll, Benjamin, Townsend, Robert M., Zhorin, Victor
Format: Article
Language:English
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Summary:We use a variety of different datasets from Thailand to study not only the extremes of micro and macro variables but also within-country flow of funds and labor migration. We develop a general equilibrium model that encompasses regional variation in the type of financial friction and calibrate it to measured variation in regional aggregates. The model predicts substantial capital and labor flows from rural to urban areas even though these differ only in the underlying financial regime. Predictions for micro variables not used directly provide a model validation. Finally, we estimate the impact of a policy of counterfactual, regional isolationism.
ISSN:0027-8424
1091-6490
DOI:10.1073/pnas.1707055114