the extensive margin. When credit barriers<sup>areremoved,theybenefitthe most.Thesharpverticalrise</sup> corresponds to those on the margin<sup>ofbecomingaentrepreneurintheno-crediteconomy.Intuitively,</sup> this is because with their low x, they<sup>wouldhaveearnedthehighest profitsif theycould havebeen</sup> entrepreneurs. Credit in the intermediated<sup>sectorallowsthat.</sup> A problem with this analysis, however,<sup>is</sup> that<sup>we maybe computingwelfaregains for householdwith</sup> _(b,_ x) combinations that do not actually exist<sup>in either the liberalizedeconomyor the no-crediteconomy,</sup> that is, have zero probability under the<sup>endogenousdistributionof wealth.To remedythis,Figures7c</sup> and 7d also in page 44 display the wealth<sup>distributionsoftheno-crediteconomyand crediteconomy</sup> (over both sectors) in 1979.

Figures 7f and 7h present a similar version,<sup>plottingthe jointdensity levelcurves of the end-of-period</sup> wealth levels in the no credit and liberalized<sup>sector36 .Thoseonthe45degreelinecorrespondto those</sup> with no change in wealth. We use the<sup>endogenousend-of-periodwealthdistributioninboth thecredit</sup> and no-credit sector and the distribution<sup>of xatthe estimatedtiltparameter mtoweighteach</sup><sup>_(b,x)_</sup> pair.

We report last the density of percentage<sup>changesinwealth inFigures7e and7galsoinpage 44by</sup> integrating the 3D graph in Figure 7a over the<sup>estimated rangeof x andweightingeach</sup><sup>_b_point usingboth</sup> the credit and no-credit wealth distribution<sup>3 7 .We recognizethat the distributionof wealth is endogenous,</sup> so taking any weighting is somewhat arbitrary.<sup>Still,whencompared,theydisplay a somewhatdifferent</sup> pattern. We can convert this relative wealth<sup>gaininto1997bahtfor bothweightingdistributions.The</sup> mean gain amounts to 61,582 baht using the<sup>no-creditdistributionor82,376bahtusingthe creditone.</sup> These numbers correspond to roughly<sup>1.5timesandtwicetheaveragehouseholdyearly1979income38</sup> (measured in 1997 baht) respectively. The<sup>modalgainsaresignificantlylower,6,961bahtor7,779 baht</sup> if we use the no-credit or credit distribution,<sup>respectively,whichamounttoroughly17percentor 19</sup> percent of the 1979 average household<sup>yearlyincome.In dollars,these gainsbecome$278 or$311using</sup> the no-credit or credit distribution at the<sup>1997exchangerates.</sup> By 1996, the wage has risen to 0.022<sup>in</sup> the<sup>non-intermediatedeconomyandto0.029intheinter-</sup> mediated one. The interest rate in the<sup>intermediatedsector hasfallento57percent.Theoccupation</sup> partition diagram has no agents who<sup>wereentrepreneurs becomingworkers(thoughthat numberwas</sup> never large). In contrast, the relative number<sup>ofthosewhowereworkersandbecomeentrepreneursis</sup> higher. The three dimensional diagramn<sup>inFigure8ainpage45ofwealthchangesisstill tiltedupward</sup> towards high wealth, due to the interest<sup>rateeffect.Onthebackedge,atthehighest wealthshown,</sup> wealth increments are positive and constant<sup>for thosewho stay as workers,bothdue to higher wagesand</sup> interest rate earnings, but those who<sup>wereworkersandbecomeentrepreneurshavehighwealthgains,</sup> which increases as _x_ falls, since net profits<sup>ofentrepreneursincreases assetupcostsfallsandfundscan</sup> be put into the money market. However,<sup>onereachesa pointwheretheywould havebeenentrepreneurs</sup> in both economies, incurring x in both<sup>economies,andthenthewealthgainsthoughincreasingasx</sup> decreases are relatively small or negative. Note<sup>that onthe onehand, entrepreneursinthe intermediated</sup> sector face higher wages, obtaining<sup>lowerprofits.Onthe other,theyare able tocollectinterestontheir</sup> 38The **joint** density is approximated using kernel<sup>density estimation,from a generated sampleof 10,000 pointsThe kerrnel</sup> used is Epanechnikov. See Silverman (1986)<sup>fordetails.Somelevelcurvesfallbelowthe 45°line,butthisis anartifact</sup> of the kernel density estimation which tends<sup>to oversmooth.Figure 7a assuresus that the liberalization only improvesthe</sup> welfare. Each contour level represents an increased<sup>densityof 0.01,starting at0.0025</sup>

> 37The density is approximated by the techniques explained **in** Footnote 36 3The 1979 average household yearly income is<sup>estimatedfromtheSESdata.</sup><sup>**Since**wedonothaveactualSESdata m</sup> 1979, we interpolate it **using** the average annual<sup>growthratebetween1976and1981</sup>

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