Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5100003 | Journal of Economic Dynamics and Control | 2006 | 28 Pages |
Abstract
This paper examines the theory of credit as a means of raising the productivity and living standards of producer households who face significant uncertainty. A dynamic model with uncertainty is developed in which households choose how much to invest in a yield-enhancing technology, how much to consume, and how much to save. I find that while credit has important short and medium run benefits for productivity, consumption, and lifetime utility, these benefits are not sustained in the long run. Indeed, under reasonable parameter settings, mean consumption will fall. In contrast, the paper shows that risk mitigation has sustained benefits for productivity, lifetime utility, and equality.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Theresa Osborne,