Banerjee, Abhijit V.2017-08-172017-08-172009https://hdl.handle.net/10986/27940The point of departure of this paper is that in the absence of effectively functioning asset markets the distribution of wealth matters for efficiency. Inefficient asset markets depress total factor productivity (TFP) in two ways: first, by not allowing efficient firms to grow to the size that they should achieve (this could include many great firms that are never started); and second, by allowing inefficient firms to survive by depressing the demand for factors (good firms are too small) and hence factor prices. Both of these effects are dampened when the wealth of the economy is in the hands of the most productive people, again, for two reasons: first, because they do not rely as much on asset markets to get outside resources into the firm; and second, because wealth allows them to self insure and therefore they are more willing to take the right amount of risk. None of this, however, tells us that efficiency enhancing redistributions must always be targeted to the poorest. There is some reason to believe that a lot of the inefficiency lies in the fact that many medium size firms are too small.en-USCC BY 3.0 IGOACCESS TO CREDITAGENCY PROBLEMAGRICULTUREALLOCATIONAMOUNT OF RISKASSET MARKETSASSETSAVERAGE PRODUCTIVITYBANKING SYSTEMBANKSBIDBONDBORROWERBORROWINGBUSINESS OWNERSCAPACITY UTILIZATIONCAPITAL MARKETCAPITAL MARKETSCAPITAL STOCKCOLLATERALCOMPLEMENTARY INPUTSCONSUMPTION SMOOTHINGCONTRACT ENFORCEMENTCOST OF CAPITALCREDIT CONSTRAINTCREDIT CONSTRAINTSCREDIT LIMITCREDIT MARKETCREDIT MARKETSDEFAULT COSTSDEFAULT RATEDEFAULT RATESDEPOSITDEPOSITORSDEVELOPING COUNTRIESDEVELOPING COUNTRYDEVELOPMENT BANKDEVELOPMENT ECONOMICSDIMINISHING RETURNSDIMINISHING RETURNS TO SCALEDISTRIBUTION OF WEALTHDIVERSIFICATIONDUAL ECONOMYDURABLEEARNINGSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC RESEARCHECONOMIC THEORYECONOMICS STUDIESEDUCATIONAL BENEFITSEMPOWERMENTENTREPRENEURENTREPRENEURSEXPECTED RETURNSEXPENDITUREEXPENDITURESEXPLICIT CREDITEXPROPRIATIONEXTERNALITIESFACTORS OF PRODUCTIONFAMILIESFARMERFARMERSFINANCIAL ASSETFINANCIAL ASSETSFINANCIAL INTERMEDIARIESFINANCIAL MARKETSFINANCIAL SYSTEMSFISCAL POLICIESFIXED COSTFIXED COSTSFORM OF CREDITGDPGOVERNMENT INTERVENTIONGREEN REVOLUTIONGROUPS OF PEOPLEGROWTH RATEGROWTH THEORYHIGH INTEREST RATESHOLDINGHOUSEHOLD WEALTHHOUSEHOLDSHUMAN CAPITALINCENTIVE COSTSINCOMEINCOME DISTRIBUTIONINCOME INEQUALITYINCREASING RETURNSINEFFICIENCYINEQUALITYINFORMAL CREDITINFORMAL FINANCEINFORMAL INSURANCEINFORMAL LENDERSINFORMATIONAL ASYMMETRIESINSURANCE MARKETINSURANCE MARKETSINTEREST COSTSINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL DEVELOPMENTINVENTORIESINVESTINGINVESTMENT DECISIONINVESTMENT DECISIONSINVESTMENT NEEDSINVESTMENT OPPORTUNITIESINVESTMENT OPPORTUNITYINVESTMENT RETURNSLABOR MARKETLACK OF ACCESSLAND MARKETLAND OWNERSHIPLAND REFORMLAND REFORMSLAND RIGHTSLAND TITLINGLANDHOLDERSLEGAL OBLIGATIONLEGAL TITLELENDERLENDERSLIQUID WEALTHLIVING STANDARDSLOANLOAN SIZELOCAL FINANCELONG TERM INVESTMENTMACROECONOMIC POLICYMACROECONOMICSMARGINAL PRODUCTMARGINAL PRODUCTSMARKET CONSTRAINTSMARKET ECONOMIESMARKET RETURNMERITOCRACYMICROCREDITMICROENTERPRISESMIDDLE INCOME COUNTRIESMONEYLENDERSMORAL HAZARDMORTGAGENATURAL RESOURCESNET WORTHNEW BUSINESSNUTRITIONOPPORTUNITY COSTOUTPUT PER CAPITAPAWNPAWN SHOPSPOLITICAL ECONOMYPOTENTIAL INVESTORSPRIME LENDING RATEPRIVATE INVESTMENTPRIVATE RETURNSPRODUCTION EFFICIENCYPRODUCTION FUNCTIONPRODUCTIVE ASSETSPRODUCTIVE INVESTMENTPROFITABILITYPUBLIC FINANCERATE OF RETURNSRATES OF RETURNRATES OF RETURNSREAL ESTATEREAL EXCHANGE RATESREAL INTERESTREAL INTEREST RATESRECESSIONSREPAYMENTRESIDUAL CLAIMANTRISK AVERSIONRISK SHARINGRURAL CREDITRURAL CREDIT MARKETSAVINGSSELF EMPLOYMENTSHAREHOLDERSSHORT TERM INVESTMENTSSLRSMALL BUSINESSSMALL BUSINESSESSMALL ENTERPRISESSMALL FARMSOCIAL NORMSSOCIAL RELATIONSSTATEMENTSTOCK MARKETSTOCKSTAXTAX COLLECTIONTELECOMMUNICATIONSTELECOMMUNICATIONS EQUIPMENTTOTAL FACTOR PRODUCTIVITYTRADE CREDITTRANSACTIONTRANSACTION COSTSUNDERVALUATIONVALUE ADDEDVILLAGEVILLAGESWORKING CAPITALWorking PaperWorld Bank10.1596/27940