This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Overcoming Information Asymmetries in Low-Income Lending: Lessons from the “Working Wheels” Program

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Jessica Holmes () (Department of Economics, Middlebury College)
Jonathan Isham () (Department of Economics, Middlebury College)
Jessica Wasilewski () (Department of Economics, Middlebury College)

Additional information is available for the following registered author(s):

Abstract

Without access to transportation, the welfare-to-work transition is nearly impossible, yet little is known about the effectiveness of programs designed to improve credit access. Since 1998, Vermont's TANF funds have provided automobile loans through the “Working Wheels” program. We use microlevel data from this program to explore how to cost-effectively provide loans to clients who cannot obtain affordable loans elsewhere. Our results verify the importance of relationship lending, particularly among those without documented credit histories. In the presence of information asymmetries about credit history, our results justify the increased trust placed in clients with whom the bank has a stronger relationship; such clients, ceteris paribus, are less likely to default. We conclude that in the current climate of welfare reform, policymakers should consider programs that encourage welfare recipients to establish and maintain relationships with financial institutions in order to facilitate access to credit and minimize the risk of default.

Download Info
To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Publisher Info
Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 72 (2005)
Issue (Month): 2 (October)
Pages: 329–351
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:sej:ancoec:v:72:2:y:2005:p:329-351

Contact details of provider:
Web page: http://www.southerneconomic.org/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Laura Razzolini).

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
R42 - Urban, Rural, and Regional Economics - - Transportation Systems - - - Government and Private Investment Analysis

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Cole, Rebel A., 1998. "The importance of relationships to the availability of credit," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 959-977, August. [Downloadable!] (restricted)
  2. Schmid, A. Allan & Robison, Lindon J., 1995. "Applications Of Social Capital Theory," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 27(01), July. [Downloadable!]
  3. Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January. [Downloadable!] (restricted)
  4. Perraudin, William R M & Sorensen, Bent E, 1992. "The Credit-Constrained Consumer: An Empirical Study of Demand and Supply in the Loan Market," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 179-92, April.
  5. Stiglitz, Joseph E & Weiss, Andrew, 1992. "Asymmetric Information in Credit Markets and Its Implications for Macro-economics," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 694-724, October. [Downloadable!] (restricted)
  6. Robert B. Avery & Raphael W. Bostic & Paul S. Calem & Glenn B. Canner, 1996. "Credit risk, credit scoring, and the performance of home mortgages," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 621-648.
  7. Milde, Hellmuth & Riley, John G, 1988. "Signaling in Credit Markets," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 101-29, February. [Downloadable!] (restricted)
    Other versions:
  8. Raphael, Steven & Rice, Lorien, 2002. "Car ownership, employment, and earnings," Journal of Urban Economics, Elsevier, vol. 52(1), pages 109-130, July. [Downloadable!] (restricted)
  9. Leonard I. Nakamura, 1993. "Recent research in commercial banking: information and lending," Working Papers 93-24, Federal Reserve Bank of Philadelphia.
  10. Loretta J. Mester, 1997. "What's the point of credit scoring?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-16. [Downloadable!]
  11. Katherine O'Regan & John Quigley, 2006. "Accessibility and Economic Opportunity," Berkeley Program on Housing and Urban Policy, Working Paper Series 1003, Berkeley Program on Housing and Urban Policy. [Downloadable!]
    Other versions:
  12. Chakravarty, Sugato & Scott, James S, 1999. "Relationships and Rationing in Consumer Loans," Journal of Business, University of Chicago Press, vol. 72(4), pages 523-44, October. [Downloadable!] (restricted)
  13. Jaffee, Dwight M & Russell, Thomas, 1984. "Imperfect Information, Uncertainty, and Credit Rationing: A Reply," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 869-72, November. [Downloadable!] (restricted)
  14. Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier. [Downloadable!] (restricted)
  15. Williamson, Stephen D, 1987. "Costly Monitoring, Loan Contracts, and Equilibrium Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 135-45, February. [Downloadable!] (restricted)
    Other versions:
  16. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March. [Downloadable!] (restricted)
  17. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  18. Holzer Harry J. & Ihlanfeldt Keith R. & Sjoquist David L., 1994. "Work, Search, and Travel among White and Black Youth," Journal of Urban Economics, Elsevier, vol. 35(3), pages 320-345, May. [Downloadable!] (restricted)
  19. Allen N. Berger & Gregory F. Udell, 2001. "Small business credit availability and relationship lending: the importance of bank organizational structure," Finance and Economics Discussion Series 2001-36, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  20. Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jessica Holmes & Jonathan Isham & Ryan Petersen & Paul Sommers, 2005. "Does Relationship Lending Still Matter in the Consumer Banking Sector? Evidence from Two Financial Service Organizations in Vermont," Middlebury College Working Paper Series 0511, Middlebury College, Department of Economics. [Downloadable!]
  2. Jessica A. Holmes & Jonathan T. Isham & Paul M. Sommers, 2007. "Is George Bailey Dead?," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 3(1), pages 19-24, January. [Downloadable!] (restricted)
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by editing a NEP report.

This page was last updated on 2009-11-6.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.