We use a variety of different datasets from Thailand to study not only the extremes of micro and macro variables but also within-country flow of funds and labor migration. We develop a general equilibrium model that encompasses regional variation in the type of financial friction and calibrate it to measured variation in regional aggregates. The model predicts substantial capital and labor flows from rural to urban areas even though these differ only in the underlying financial regime. Predictions for micro variables not used directly provide a model validation. Finally, we estimate the impact of a policy of counterfactual, regional isolationism.

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http://www.ncbi.nlm.nih.gov/pmc/articles/PMC5474799PMC
http://dx.doi.org/10.1073/pnas.1707055114DOI Listing

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