Access to Finance, Product Innovation and Middle-Income Traps
This paper studies interactions between access to finance, product innovation, and labor supply in a two-period overlapping generations model with an endogenous skill distribution and credit market frictions. In the model lack of access to finance...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/02/18900889/access-finance-product-innovation-middle-income-traps http://hdl.handle.net/10986/17307 |
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okr-10986-17307 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
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World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCOUNTING ADVERSE EFFECT AGENCY PROBLEMS AGGREGATE DEMAND AGGREGATE DEMAND CURVE ARBITRAGE ASYMMETRIC INFORMATION AVAILABILITY OF FINANCE BANK CREDIT BANK LOAN BANK MONITORING BANK POLICY BANKRUPTCY BANKS BORROWER BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS BUSINESS CYCLE CAPITAL GAINS CAPITAL INVESTMENT CAPITAL MARKETS CAPITAL STOCK CASH FLOWS CASH RESERVES COLLATERAL CONSTRAINTS ON ACCESS CONTRACTUAL ARRANGEMENTS CONTRACTUAL RELATIONSHIP COST OF LOANS CREDIT BUREAUS CREDIT CONSTRAINTS CREDIT HISTORIES CREDIT MARKET CREDITOR CREDITORS DEBT DEBT FINANCE DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT OF INNOVATION DEVELOPMENT POLICY DISCOUNT RATE DIVERSIFIED PORTFOLIO DOMESTIC MARKETS EARNINGS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC RESEARCH ELASTICITY OF SUBSTITUTION EMERGING MARKETS EMPLOYMENT ENTREPRENEURIAL ACTIVITIES ENTREPRENEURS ENTREPRENEURSHIP EQUALITY EQUILIBRIUM EQUITY FINANCE EQUITY FUND EQUITY FUNDS EQUITY MARKET EQUITY MARKET DEVELOPMENT EXTERNAL CAPITAL EXTERNAL FINANCE EXTERNAL FINANCING EXTERNALITIES EXTERNALITY FEDERAL RESERVE FINANCE CONSTRAINTS FINANCIAL ACCESS FINANCIAL DEVELOPMENT FINANCIAL INNOVATION FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COST FIXED COSTS FORMAL ANALYSIS FRAUD FUNDING SOURCES GDP GOVERNMENT INTERVENTION GOVERNMENT SUBSIDIES GROUP OF FIRMS GROWTH POTENTIAL GROWTH RATE HOLDING HOUSEHOLDS HUMAN CAPITAL HUMAN CAPITAL DEVELOPMENT IMPERFECT COMPETITION INCOME INCOME GROWTH INCREASING RETURNS INEQUALITY INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INNOVATION INNOVATIONS INPUT PRICES INTANGIBLE INTELLECTUAL PROPERTY INTEREST RATE INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INVESTING JOB CREATION LABOR FORCE LABOR MARKET LABOR PRODUCTIVITY LABOR SUPPLY LACK OF ACCESS LACK OF COLLATERAL LACK OF FINANCE LAWS LEGAL CONSTRAINTS LENDER LENDERS LEVY LIMITED LIABILITY LIQUIDITY LOAN LOAN CONTRACT LOAN CONTRACTS LOAN RATE MACROECONOMICS MARGINAL COST MARGINAL PROPENSITY TO SAVE MARGINAL REVENUE MARKET CAPITALIZATION MARKET DEVELOPMENT MARKET DISTORTIONS MONETARY FUND MONITORING COSTS MONOPOLISTIC COMPETITION MONOPOLY MORAL HAZARD MULTIPLE EQUILIBRIA NEW ENTRANTS OPPORTUNITY COST OVERLAPPING GENERATIONS MODEL PATENTS PHYSICAL ASSETS PHYSICAL CAPITAL POLITICAL ECONOMY POOR ACCESS PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRIVATE EQUITY PRIVATE FINANCE PRIVATE SECTOR CREDIT PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTIVITY PROFITABILITY PROPERTY RIGHTS PROVISION OF LOANS PUBLIC POLICY RATE OF RETURN RATES OF RETURN RETURNS RISK AVERSION RISK CAPITAL SAVINGS SAVINGS RATE SKILLED WORKERS SMALL ENTERPRISES SOURCE OF INCOME SOURCES OF FINANCE START-UPS STOCK MARKET STOCK MARKET DEVELOPMENT STOCKS TAX TAX INCENTIVES TAX RATE TELECOMMUNICATIONS TRANSACTION TRANSACTION COSTS UNSKILLED LABOR UNSKILLED WORKERS UTILITY FUNCTION VENTURE CAPITAL VENTURE CAPITAL INVESTMENT VENTURE CAPITALISTS WAGES WEALTH |
| spellingShingle |
ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCOUNTING ADVERSE EFFECT AGENCY PROBLEMS AGGREGATE DEMAND AGGREGATE DEMAND CURVE ARBITRAGE ASYMMETRIC INFORMATION AVAILABILITY OF FINANCE BANK CREDIT BANK LOAN BANK MONITORING BANK POLICY BANKRUPTCY BANKS BORROWER BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS BUSINESS CYCLE CAPITAL GAINS CAPITAL INVESTMENT CAPITAL MARKETS CAPITAL STOCK CASH FLOWS CASH RESERVES COLLATERAL CONSTRAINTS ON ACCESS CONTRACTUAL ARRANGEMENTS CONTRACTUAL RELATIONSHIP COST OF LOANS CREDIT BUREAUS CREDIT CONSTRAINTS CREDIT HISTORIES CREDIT MARKET CREDITOR CREDITORS DEBT DEBT FINANCE DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT OF INNOVATION DEVELOPMENT POLICY DISCOUNT RATE DIVERSIFIED PORTFOLIO DOMESTIC MARKETS EARNINGS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC RESEARCH ELASTICITY OF SUBSTITUTION EMERGING MARKETS EMPLOYMENT ENTREPRENEURIAL ACTIVITIES ENTREPRENEURS ENTREPRENEURSHIP EQUALITY EQUILIBRIUM EQUITY FINANCE EQUITY FUND EQUITY FUNDS EQUITY MARKET EQUITY MARKET DEVELOPMENT EXTERNAL CAPITAL EXTERNAL FINANCE EXTERNAL FINANCING EXTERNALITIES EXTERNALITY FEDERAL RESERVE FINANCE CONSTRAINTS FINANCIAL ACCESS FINANCIAL DEVELOPMENT FINANCIAL INNOVATION FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COST FIXED COSTS FORMAL ANALYSIS FRAUD FUNDING SOURCES GDP GOVERNMENT INTERVENTION GOVERNMENT SUBSIDIES GROUP OF FIRMS GROWTH POTENTIAL GROWTH RATE HOLDING HOUSEHOLDS HUMAN CAPITAL HUMAN CAPITAL DEVELOPMENT IMPERFECT COMPETITION INCOME INCOME GROWTH INCREASING RETURNS INEQUALITY INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INNOVATION INNOVATIONS INPUT PRICES INTANGIBLE INTELLECTUAL PROPERTY INTEREST RATE INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INVESTING JOB CREATION LABOR FORCE LABOR MARKET LABOR PRODUCTIVITY LABOR SUPPLY LACK OF ACCESS LACK OF COLLATERAL LACK OF FINANCE LAWS LEGAL CONSTRAINTS LENDER LENDERS LEVY LIMITED LIABILITY LIQUIDITY LOAN LOAN CONTRACT LOAN CONTRACTS LOAN RATE MACROECONOMICS MARGINAL COST MARGINAL PROPENSITY TO SAVE MARGINAL REVENUE MARKET CAPITALIZATION MARKET DEVELOPMENT MARKET DISTORTIONS MONETARY FUND MONITORING COSTS MONOPOLISTIC COMPETITION MONOPOLY MORAL HAZARD MULTIPLE EQUILIBRIA NEW ENTRANTS OPPORTUNITY COST OVERLAPPING GENERATIONS MODEL PATENTS PHYSICAL ASSETS PHYSICAL CAPITAL POLITICAL ECONOMY POOR ACCESS PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRIVATE EQUITY PRIVATE FINANCE PRIVATE SECTOR CREDIT PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTIVITY PROFITABILITY PROPERTY RIGHTS PROVISION OF LOANS PUBLIC POLICY RATE OF RETURN RATES OF RETURN RETURNS RISK AVERSION RISK CAPITAL SAVINGS SAVINGS RATE SKILLED WORKERS SMALL ENTERPRISES SOURCE OF INCOME SOURCES OF FINANCE START-UPS STOCK MARKET STOCK MARKET DEVELOPMENT STOCKS TAX TAX INCENTIVES TAX RATE TELECOMMUNICATIONS TRANSACTION TRANSACTION COSTS UNSKILLED LABOR UNSKILLED WORKERS UTILITY FUNCTION VENTURE CAPITAL VENTURE CAPITAL INVESTMENT VENTURE CAPITALISTS WAGES WEALTH Agénor, Pierre-Richard Canuto, Otaviano Access to Finance, Product Innovation and Middle-Income Traps |
| relation |
Policy Research Working Paper;No. 6767 |
| description |
This paper studies interactions between
access to finance, product innovation, and labor supply in a
two-period overlapping generations model with an endogenous
skill distribution and credit market frictions. In the model
lack of access to finance (induced by high monitoring costs)
has an adverse effect on innovation activity not only
directly but also indirectly, because too few individuals
may choose to invest in skills. If monitoring costs fall
with the number of successful projects, multiple equilibria
may emerge, one of which, a middle-income trap,
characterized by low wages in the design sector, a low share
of the labor force engaged in innovation activity, and low
growth. A sufficiently ambitious policy aimed at alleviating
constraints on access to finance by innovators may allow a
country to move away from such a trap by promoting the
production of ideas and improving incentives to invest in skills. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Agénor, Pierre-Richard Canuto, Otaviano |
| author_facet |
Agénor, Pierre-Richard Canuto, Otaviano |
| author_sort |
Agénor, Pierre-Richard |
| title |
Access to Finance, Product Innovation and Middle-Income Traps |
| title_short |
Access to Finance, Product Innovation and Middle-Income Traps |
| title_full |
Access to Finance, Product Innovation and Middle-Income Traps |
| title_fullStr |
Access to Finance, Product Innovation and Middle-Income Traps |
| title_full_unstemmed |
Access to Finance, Product Innovation and Middle-Income Traps |
| title_sort |
access to finance, product innovation and middle-income traps |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/02/18900889/access-finance-product-innovation-middle-income-traps http://hdl.handle.net/10986/17307 |
| _version_ |
1764436825075613696 |
| spelling |
okr-10986-173072021-04-23T14:03:37Z Access to Finance, Product Innovation and Middle-Income Traps Agénor, Pierre-Richard Canuto, Otaviano ACCESS TO EXTERNAL FINANCE ACCESS TO FINANCE ACCOUNTING ADVERSE EFFECT AGENCY PROBLEMS AGGREGATE DEMAND AGGREGATE DEMAND CURVE ARBITRAGE ASYMMETRIC INFORMATION AVAILABILITY OF FINANCE BANK CREDIT BANK LOAN BANK MONITORING BANK POLICY BANKRUPTCY BANKS BORROWER BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS BUSINESS CYCLE CAPITAL GAINS CAPITAL INVESTMENT CAPITAL MARKETS CAPITAL STOCK CASH FLOWS CASH RESERVES COLLATERAL CONSTRAINTS ON ACCESS CONTRACTUAL ARRANGEMENTS CONTRACTUAL RELATIONSHIP COST OF LOANS CREDIT BUREAUS CREDIT CONSTRAINTS CREDIT HISTORIES CREDIT MARKET CREDITOR CREDITORS DEBT DEBT FINANCE DEVELOPING COUNTRIES DEVELOPMENT BANK DEVELOPMENT ECONOMICS DEVELOPMENT OF INNOVATION DEVELOPMENT POLICY DISCOUNT RATE DIVERSIFIED PORTFOLIO DOMESTIC MARKETS EARNINGS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC POLICY ECONOMIC RESEARCH ELASTICITY OF SUBSTITUTION EMERGING MARKETS EMPLOYMENT ENTREPRENEURIAL ACTIVITIES ENTREPRENEURS ENTREPRENEURSHIP EQUALITY EQUILIBRIUM EQUITY FINANCE EQUITY FUND EQUITY FUNDS EQUITY MARKET EQUITY MARKET DEVELOPMENT EXTERNAL CAPITAL EXTERNAL FINANCE EXTERNAL FINANCING EXTERNALITIES EXTERNALITY FEDERAL RESERVE FINANCE CONSTRAINTS FINANCIAL ACCESS FINANCIAL DEVELOPMENT FINANCIAL INNOVATION FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIARY FINANCIAL INTERMEDIATION FINANCIAL LIBERALIZATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COST FIXED COSTS FORMAL ANALYSIS FRAUD FUNDING SOURCES GDP GOVERNMENT INTERVENTION GOVERNMENT SUBSIDIES GROUP OF FIRMS GROWTH POTENTIAL GROWTH RATE HOLDING HOUSEHOLDS HUMAN CAPITAL HUMAN CAPITAL DEVELOPMENT IMPERFECT COMPETITION INCOME INCOME GROWTH INCREASING RETURNS INEQUALITY INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INNOVATION INNOVATIONS INPUT PRICES INTANGIBLE INTELLECTUAL PROPERTY INTEREST RATE INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INVESTING JOB CREATION LABOR FORCE LABOR MARKET LABOR PRODUCTIVITY LABOR SUPPLY LACK OF ACCESS LACK OF COLLATERAL LACK OF FINANCE LAWS LEGAL CONSTRAINTS LENDER LENDERS LEVY LIMITED LIABILITY LIQUIDITY LOAN LOAN CONTRACT LOAN CONTRACTS LOAN RATE MACROECONOMICS MARGINAL COST MARGINAL PROPENSITY TO SAVE MARGINAL REVENUE MARKET CAPITALIZATION MARKET DEVELOPMENT MARKET DISTORTIONS MONETARY FUND MONITORING COSTS MONOPOLISTIC COMPETITION MONOPOLY MORAL HAZARD MULTIPLE EQUILIBRIA NEW ENTRANTS OPPORTUNITY COST OVERLAPPING GENERATIONS MODEL PATENTS PHYSICAL ASSETS PHYSICAL CAPITAL POLITICAL ECONOMY POOR ACCESS PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRIVATE EQUITY PRIVATE FINANCE PRIVATE SECTOR CREDIT PRODUCTION COSTS PRODUCTION FUNCTION PRODUCTION INPUTS PRODUCTIVITY PROFITABILITY PROPERTY RIGHTS PROVISION OF LOANS PUBLIC POLICY RATE OF RETURN RATES OF RETURN RETURNS RISK AVERSION RISK CAPITAL SAVINGS SAVINGS RATE SKILLED WORKERS SMALL ENTERPRISES SOURCE OF INCOME SOURCES OF FINANCE START-UPS STOCK MARKET STOCK MARKET DEVELOPMENT STOCKS TAX TAX INCENTIVES TAX RATE TELECOMMUNICATIONS TRANSACTION TRANSACTION COSTS UNSKILLED LABOR UNSKILLED WORKERS UTILITY FUNCTION VENTURE CAPITAL VENTURE CAPITAL INVESTMENT VENTURE CAPITALISTS WAGES WEALTH This paper studies interactions between access to finance, product innovation, and labor supply in a two-period overlapping generations model with an endogenous skill distribution and credit market frictions. In the model lack of access to finance (induced by high monitoring costs) has an adverse effect on innovation activity not only directly but also indirectly, because too few individuals may choose to invest in skills. If monitoring costs fall with the number of successful projects, multiple equilibria may emerge, one of which, a middle-income trap, characterized by low wages in the design sector, a low share of the labor force engaged in innovation activity, and low growth. A sufficiently ambitious policy aimed at alleviating constraints on access to finance by innovators may allow a country to move away from such a trap by promoting the production of ideas and improving incentives to invest in skills. 2014-03-18T20:10:51Z 2014-03-18T20:10:51Z 2014-02 http://documents.worldbank.org/curated/en/2014/02/18900889/access-finance-product-innovation-middle-income-traps http://hdl.handle.net/10986/17307 English en_US Policy Research Working Paper;No. 6767 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |