Essays on access to financial institutions, inequality, and redistribution

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This book explores various strategies to reduce income and wealth inequality, focusing on redistributive taxation and enhancing economic opportunities for poor households through improved access to capital markets. Chapter 2 delves into capital income taxation, examining the trade-off between its redistributive benefits and negative incentive effects, which can lead to reduced savings and lower future growth rates. The findings indicate that in a heterogeneous population regarding productivity and endowments, zero capital income taxes are generally not optimal. Additionally, the chapter highlights that the extent and composition of inequality significantly influence the marginal welfare effects of taxation. While redistribution helps improve the circumstances of poor households, it primarily addresses the consequences of inequality rather than its root causes. A major barrier for small entrepreneurs is their limited access to financial markets. The second part of the book investigates Caja Los Andes, a microfinance institution in Bolivia that offers financial services to small enterprises and impoverished households. Chapter 3 tracks the growth of these enterprises, revealing substantial increases in assets and income over time. Chapter 4 examines selection issues, assessing how much of this growth can be attributed to loans from Caja Los Andes, finding a strong positive impact on growth, particularly for larger businesses. Fi