Incentives and the De Soto Effect
AbstractThis paper explores the consequences of improving property rights to facilitate the use of fixed assets as collateral, popularly attributed to the influential policy advocate Hernando de Soto. We use an equilibrium model of a credit market with moral hazard to characterize the theoretical effects and also develop a quantitative analysis using data from Sri Lanka. We show that the effects are likely to be nonlinear and heterogeneous by wealth group. They also depend on the extent of competition between lenders. There can be significant increases in profits and reductions in interest rates when credit markets are competitive. However, since these are due to reductions in moral hazard, that is, increased effort, the welfare gains tend to be modest when cost of effort is taken into account. Allowing for an extensive margin where borrowers gain access to the credit market can make these effects larger depending on the underlying wealth distribution. Copyright 2012, Oxford University Press.
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 Oxford University Press in its journal The Quarterly Journal of Economics.
Volume (Year): 127 (2012)
Issue (Month): 1 ()
Contact details of provider:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Diego Puga & Daniel Trefler, 2012.
"International Trade and Institutional Change: Medieval Venice's Response to Globalization,"
NBER Working Papers
18288, National Bureau of Economic Research, Inc.
- Diego Puga & Daniel Trefler, 2013. "International Trade And Institutional Change: Medieval Venice’S Response To Globalization," Working Papers wp2013_1307, CEMFI.
- Puga, Diego & Trefler, Daniel, 2012. "International trade and institutional change: Medieval Venice's response to globalization," CEPR Discussion Papers 9076, C.E.P.R. Discussion Papers.
- Deininger, Klaus & Goyal, Aparajita, 2010.
"Going digital : credit effects of land registry computerization in India,"
Policy Research Working Paper Series
5244, The World Bank.
- Deininger, Klaus & Goyal, Aparajita, 2012. "Going digital: Credit effects of land registry computerization in India," Journal of Development Economics, Elsevier, vol. 99(2), pages 236-243.
- Kodila-Tedika, Oasis, 2012.
"Entrepreneurship and property right: de Soto'r right
[Entrepreneuriat et droit de propriété : de Soto a raison]," MPRA Paper 43464, University Library of Munich, Germany.
- Stefania Lovo, 2013. "Tenure insecurity and investment in soil conservation. Evidence from Malawi," Grantham Research Institute on Climate Change and the Environment Working Papers 114, Grantham Research Institute on Climate Change and the Environment.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.