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Enforcement with Costly Group Formation

  • Sudipta Sarangi

    ()

    (Louisiana State University)

  • Prabirendra Chatterjee

    ()

    (Louisiana State University)

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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File URL: http://www.accessecon.com/pubs/EB/2005/Volume15/EB-04O10003A.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 15 (2005)
Issue (Month): 9 ()
Pages: 1-8

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Handle: RePEc:ebl:ecbull:eb-04o10003
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  1. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, vol. 60(1), pages 195-228, October.
  2. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-75, July.
  3. Van Tassel, Eric, 1999. "Group lending under asymmetric information," Journal of Development Economics, Elsevier, vol. 60(1), pages 3-25, October.
  4. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
  5. Prabirendra Chatterjee & Sudipta, Sarangi, . "Social Identity and Group Lending," Working Papers UWEC-2005-06-R, University of Washington, Department of Economics.
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