Was prometheus unbound by chance? Risk diversification and growth

摘要: This paper offers a theory of development that links the degree market incompleteness to capital accumulation and growth. At early stages development, presence projects limits risk spreading (diversification) economy can achieve. The desire avoid highly risky investments slows down accumulation, inability diversify idiosyncratic introduces large amount uncertainty in growth process. typical pattern will consist lengthy period “primitive accumulation” with variable output, followed by takeoff financial deepening and, finally, steady “Lucky” countries spend relatively less time primitive stage develop faster. Although all agents are price takers there no technological spillovers, decentralized equilibrium is inefficient because individuals do not take into account their impact on others' diversification opportunities. We also show our results generalize economies international flows.