Access to Finance, Product Innovation and Middle-Income Traps

Interactions between access to finance, product innovation, and labor supply are studied in a two-period overlapping generations model with an endogenous skill distribution and financial market imperfections. In the model lack of access to finance (induced by high monitoring costs) has an adverse ef...

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Main Authors:	Agénor, Pierre-Richard, Canuto, Otaviano
Format:	Journal Article
Published:	Elsevier 2018
Subjects:	FINANCING CONSTRAINTS INNOVATION LABOR SUPPLY ACCESS TO FINANCE LABOR SKILLS MIDDLE-INCOME TRAP
Online Access:	http://hdl.handle.net/10986/29320

id	okr-10986-29320
recordtype	oai_dc
spelling	okr-10986-293202021-05-25T10:54:43Z Access to Finance, Product Innovation and Middle-Income Traps Agénor, Pierre-Richard Canuto, Otaviano FINANCING CONSTRAINTS INNOVATION LABOR SUPPLY ACCESS TO FINANCE LABOR SKILLS MIDDLE-INCOME TRAP Interactions between access to finance, product innovation, and labor supply are studied in a two-period overlapping generations model with an endogenous skill distribution and financial market imperfections. 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 steady states may emerge, one of which defined as 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. 2018-02-05T21:53:31Z 2018-02-05T21:53:31Z 2017-06 Journal Article Research in Economics 1090-9443 http://hdl.handle.net/10986/29320 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Elsevier Publications & Research :: Journal Article Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	FINANCING CONSTRAINTS INNOVATION LABOR SUPPLY ACCESS TO FINANCE LABOR SKILLS MIDDLE-INCOME TRAP
spellingShingle	FINANCING CONSTRAINTS INNOVATION LABOR SUPPLY ACCESS TO FINANCE LABOR SKILLS MIDDLE-INCOME TRAP Agénor, Pierre-Richard Canuto, Otaviano Access to Finance, Product Innovation and Middle-Income Traps
description	Interactions between access to finance, product innovation, and labor supply are studied in a two-period overlapping generations model with an endogenous skill distribution and financial market imperfections. 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 steady states may emerge, one of which defined as 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	Journal Article
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	Elsevier
publishDate	2018
url	http://hdl.handle.net/10986/29320
_version_	1764469047085236224

Access to Finance, Product Innovation and Middle-Income Traps

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