This paper provides a quantitative evaluation of the aggregate and distributional impacts of economy-wide microfinance or other credit programs targeted toward small-scale entrepreneurs. In our analysis, we find that the redistributive impacts of microfinance are stronger in general-equilibrium,...

What are the micro and macro implications of a credit crunch? We study this question in a model where heterogeneous entrepreneurs can finance their investment by borrowing subject to collateral constraints and/or by using internal funds. We discipline our theory by requiring that the size...

In our model, short-sighted policy-makers choose to subsidize productive entrepreneurs to relax their limited commitments. In the short-run, this policy reallocates capital from unproductive towards productive entrepreneurs, and boosts per-capita income, TFP and capital accumulation. Over time,...