Income Distribution, Transaction Costs and Market Fragmentation in Informal Credit Markets
AbstractIn an environment characterized by inequitable wealth distribution and limited market-infrastructural institutions, the trust component of credit transactions is founded on personal relations. Through these, information and transaction costs advantages are provided; but also control and unequal bargaining power can be exercised. In the informal sector, transaction and information costs will lead to non-price closure in credit markets, while behavioral differences in lenders will lead to manipulation of prices as well as of quantities. The quantity-closure rules are modeled and tested for two types of informal lenders in the agricultural sector of the Philippines, the trader-lenders and the farmer-lenders. It is found that the two groups of lenders systematically sort their borrowers and ration credit. Copyright 1992 by Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Cambridge Journal of Economics.
Volume (Year): 16 (1992)
Issue (Month): 3 (September)
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- Barham, Bradford L. & Boucher, Stephen & Carter, Michael R., 1996. "Credit constraints, credit unions, and small-scale producers in Guatemala," World Development, Elsevier, vol. 24(5), pages 793-806, May.
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