The joint liability literature claims that positive assortative matching, or risk homogeneity, is always the first best solution. We examine this claim in presence of group formation costs and find that the assertion is not always true.
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Article provided by Economics Bulletin in its journal Economics Bulletin.
Find related papers by JEL classification: O1 - Economic Development, Technological Change, and Growth - - Economic Development D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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