Redistribution, Collateral Subsidy and Screening
AbstractUnder adverse selection, redlining of borrowers may occur when their wealth is not sufficient to reach the collateral needed by creditors to separate types. In this paper, potential entrepreneurs can join in a peer group and voluntarily decide to collect and redistribute their endowments. If the fund is not enough to give everyone the amount of collateral that allows for a separation of types, this paper suggests that the government should intervene with a subsidy on the collateral. This policy produces a unique separating equilibrium and is the optimal intervention in the setup analyzed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 67 (2011)
Issue (Month): 1 (March)
Contact details of provider:
Web page: http://www.mohr.de/fa
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- G. Coco & D. De Meza & G. Pignataro & F. Reito, 2013.
"Take the money and run: making profits by paying borrowers to stay home,"
wp861, Dipartimento Scienze Economiche, Universita' di Bologna.
- Giuseppe Coco & David De Meza & Giuseppe Pignataro & Francesco Reito, 2012. "Take the Money and Run: Making Profi ts by Paying Borrowers to Stay Home," Working Papers Series wp2012_27.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).
If references are entirely missing, you can add them using this form.