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Enforcement with Costly Group Formation

Author

Listed:
  • Sudipta Sarangi

    () (Louisiana State University)

  • Prabirendra Chatterjee

    () (Louisiana State University)

Abstract

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.

Suggested Citation

  • Sudipta Sarangi & Prabirendra Chatterjee, 2005. "Enforcement with Costly Group Formation," Economics Bulletin, AccessEcon, vol. 15(9), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-04o10003
    as

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    References listed on IDEAS

    as
    1. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, pages 195-228.
    2. Van Tassel, Eric, 1999. "Group lending under asymmetric information," Journal of Development Economics, Elsevier, pages 3-25.
    3. repec:dgr:rugsom:03e04 is not listed on IDEAS
    4. Lensink, Robert & Mehrteab, Habteab T., 2003. "Risk behaviour and group formation in microcredit groups in Eritrea," Research Report 03E04, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    5. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, pages 1-18.
    6. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, pages 1-18.
    7. Prabirendra Chatterjee & Sudipta, Sarangi, "undated". "Social Identity and Group Lending," Working Papers UWEC-2005-06-R, University of Washington, Department of Economics.
    8. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, pages 195-228.
    9. 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 463-475, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Group Formation Costs;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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