The Macroeconomics of Microfinance
Francisco Buera of UCLA, Joseph Kaboski of the University of Notre Dame, and Yongseok Shin of Washington University, St. Louis, discuss the impacts of economy-wide microfinance or credit programs targeted toward small-scale businesses. They ﬁnd that the redistributive impacts of microﬁnance are stronger in general equilibrium than in partial equilibrium, but the aggregate impacts on output, capital, and consumption are smaller. Making the typical microﬁnance program more widely available has only a small impact on per-capita income, since the increase in total factor productivity (TFP) is oﬀset by lower capital accumulation that stems from the redistribution of income from high-saving individuals to low-saving ones. The vast majority of the population are positively impacted by microﬁnance, but only through the equilibrium increase in wages.
The lecture is part of a day-long conference organized by James Heckman, Nobel Laureate and professor of Economics at the University of Chicago.The conference is titled "Financing Human Capital Investment" and gathered prominent economists and policy practitioners from across the globe.
The conference represents the beginning of a systematic effort to understand the relationship between human capital development at the micro and macro levels. It was unique in its bringing together of macroeconomists who consider the aggregate consequences of heterogeneity and microeconomists whose research focuses on education. These scholars normally do not communicate, yet their work must be integrated to understand the role of finance in human capital formation. Heckman suggested that the focus of the research network should be enriched by considering family and community influences to develop a comprehensive understanding of the determinants of human flourishing.
The conference was hosted by the Markets Network, which studies how market frictions affect human capital formation and which determines the effects of policies designed to overcome the borrowing constraints that arise in the presence of such frictions. The network is part of the Human Capital and Economic Opportunity Global Working Group (HCE), headed by Heckman, Hanover Investment Group’s Robert Dugger, and the University of Wisconsin – Madison’s Steven Durlauf.
- Business and Economics
- Financing Human Capital Investment
- People » Francisco Buera
- Human capital
- Economics » Inequality and poverty
- People » Joseph Kaboski
- People » Mark Wright
- Microeconomics and industrial organization theory
- small business
- UChicago Creative
- Wage trends
- People » Yongseok Shin