Can Microcredit projects pro innovation influence the European Integration Process?

Samuele Centorrino – ID 993683  
Can Microcredit projects pro innovation influence the European Integration process? 
It is not unlikely that poverty and lack of growth may lead to this kind of scenario. This 
does not allow microcredit to work, where it is more necessary.   
I tried to take into account all these peculiarities of joint liabilities. But in some case I 
need to make some assumptions about them in order to simplify the analysis. 
In this paper I merge an integration framework and a simple microcredit market 
analysis. The two frameworks which I will mainly use are Martin and Ottaviano (1996)
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 and 
Masciandaro and Dalla Pellegrina (2004)
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.  
Martin and Ottaviano show, in a two location economy, that forward and backward 
linkages at work in the model may lead one of the two locations to become the one where all 
productive activities are concentrated.  
Masciandaro and Dalla Pellegrina, instead, show the differences between the informal 
credit and the micro-lending activities in a framework where money borrowers act in a 
competitive market.  
The idea that led me to carry on this kind of analysis is the following.  
One of the main objectives of the European Union is to achieve a better integration 
and cohesion among the members by reducing regional disparities.  
Martin and Ottaviano prove that a bivariate correlation between agglomeration and 
growth exists.  This relationship is obtained in a model where labour is immobile across 
regions and there is no need for any capital endowment.  
Khan and Sehadji (2000)
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 prove a positive and statistically significant relationship 
between financial depth and growth in a cross-sectional analysis. 
Hence, I introduce a micro-lending sector in Martin and Ottaviano, to assess whether it 
can induce a different source of growth in the economy and therefore influence the 
relationship between agglomeration and growth.  
The aim is to verify whether micro-lending policies and projects might be useful in 
order to boost the economy of Objective 1 regions in the European Union as claimed by the 
two documents that I cited above.  
                                                 
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 Philippe Martin and Gianmarco I P Ottaviano – Growth and Agglomeration, International Economic Review 42(4), pp. 
947-968, 1996; 
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 Lucia Dalla Pellegrina e Donato Masciandaro – “Nuova Microfinanza”? Credito informale e credito di gruppo in 
mercati competitivi, Rivista Italiana degli Economisti, a. IX, n. 1, Aprile 2004; 
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 Mohsin S. Khan and Abdelhak S. Senhadji – Financial Development and Economic Growth: An overview, IMF 
Working Paper, December 2000; 
Università Commerciale L. Bocconi – a.y. 2005-2006 
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