The effects of international financial integration in a model with heterogeneous firms and credit frictions
- This paper examines the consequences of international financial integration in a two-sector standard incomplete markets model with occupational choice under risk and financial constraints affecting entrepreneurial activity. We endogenize international productivity differences and discuss the implications of international integration for the macroeconomy, inequality, and welfare. Lending countries are characterized by tighter domestic constraints and experience an increase in gross national product, whereas the gross domestic product effect is ambiguous. We conclude that international integration is beneficial only for economies where there are substantial financial constraints on entrepreneurial activity. Otherwise, a majority of households suffer, due to the unequal distribution of welfare gains and losses across the heterogeneous population.
Author details: | Christiane ClemensGND, Maik HeinemannORCiDGND |
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DOI: | https://doi.org/10.1017/S1365100517000979 |
ISSN: | 1365-1005 |
ISSN: | 1469-8056 |
Title of parent work (English): | Macroeconomic Dynamics |
Publisher: | Cambridge Univ. Press |
Place of publishing: | New York |
Publication type: | Article |
Language: | English |
Year of first publication: | 2019 |
Publication year: | 2018 |
Release date: | 2020/11/04 |
Tag: | Financial Constraints; Heterogeneous Agents; International Capital Flows; Occupational Choice |
Volume: | 23 |
Issue: | 7 |
Number of pages: | 30 |
First page: | 2815 |
Last Page: | 2844 |
Funding institution: | DFGGerman Research Foundation (DFG) [1578] |
Organizational units: | Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften |
DDC classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Peer review: | Referiert |
Publishing method: | Open Access |
Open Access / Green Open-Access |