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The Distributive Impact of Reforms in Credit Enforcement: Evidence From Indian Debt Recovery Tribunals

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  • Ulf von Lilienfeld‐Toal
  • Dilip Mookherjee
  • Sujata Visaria

Abstract

It is generally presumed that stronger legal enforcement of lender rights increases credit access for all borrowers because it expands the set of incentive compatible loan contracts. This result relies on an assumption that the supply of credit is in nitely elastic. In contrast, with inelastic supply, stronger enforcement generates general equilibrium e ects that may reduce credit access for small borrowers and expand it for wealthy borrowers. In a rm-level panel, we nd evidence that an Indian judicial reform that increased banks' ability to recover non-performing loans had such an adverse distributive impact.
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  • Ulf von Lilienfeld‐Toal & Dilip Mookherjee & Sujata Visaria, 2012. "The Distributive Impact of Reforms in Credit Enforcement: Evidence From Indian Debt Recovery Tribunals," Econometrica, Econometric Society, vol. 80(2), pages 497-558, March.
  • Handle: RePEc:ecm:emetrp:v:80:y:2012:i:2:p:497-558
    DOI: ECTA9038
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