Pedro Martins Pessoa.

03/04/2017

Orientador: Juliano Assunção.

Banca: Eduardo Zilberman. Felipe Iachan.

Starting on the early 2000s, financial depth and access to financial services surged in Brazil. The ratio of external finance to GDP increased from just over 50% to 110% from 2003 to 2012. During this period, the Brazilian economy also experienced strong growth with decreasing income inequality. The objective of this work is to gain perspective on the aggregate growth effects and the distributional consequences of the financial development as observed in Brazil from 2003 to 2012 through the lens of a dynamic model with financial frictions, where agents who differ in their ability as workers and entrepreneurs make occupational and productive choices under credit constraints. The model yields predictions of income inequality and wealth mobility, as well as productivity and the size distribution of firms. We calibrate the model to match the Brazilian economy before the financial reforms and use it to quantify the consequences of reducing financial frictions on TFP, GDP, and inequality.

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