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Earmarked credit and misallocation: evidence from Brazil

Grant number: 15/13590-6
Support Opportunities:Scholarships abroad - Research Internship - Master's degree
Effective date (Start): September 15, 2015
Effective date (End): March 14, 2016
Field of knowledge:Applied Social Sciences - Economics - Growth, Fluctuations and Economic Planning
Principal Investigator:Gabriel de Abreu Madeira
Grantee:Fernando Kuwer dos Santos
Supervisor: Benjamin Moll
Host Institution: Faculdade de Economia, Administração e Contabilidade (FEA). Universidade de São Paulo (USP). São Paulo , SP, Brazil
Research place: Princeton University, United States  
Associated to the scholarship:14/19402-4 - Directed credit and misallocation, BP.MS


The proposed dissertation will study earmarked credit impact over total factor productivity (TFP) using an occupational choice model with heterogeneous agents. Once a subgroup of agents arbitrarily receives earmarked credit, not only theirs sets of choices are changed, but all firms in the economy must adapt, resulting in an equilibrium in which some benefited firms will grow larger and non-benefited efficient firms will shrink. Hence, being a receiver of earmarked credit (or not), wealth, and talent will determine occupational choice and firm size endogenously. To provide quantitative estimates of policy effects, we will calibrate the model with data from the Brazilian economy. Simulations with counter factual exercises for policy-determined parameters will also be analyzed. (AU)

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