Small Farmers, Moneylenders and Trading Activity
In this paper, the authors show how an interlinkage between the credit and output markets is an endogenous outcome of credit market imperfections. Also, such interlinkages are Pareto optimal. This is worked out under the assumption of infinite availability of funds with the money lender. If, however, the lender faces a loanable funds constraint, it is not optimal for him to interlink, and he charges monopoly rates of interest. The paper, therefore, endogenously develops various forms of trading and lending activities. Copyright 1987 by Royal Economic Society.
Volume (Year): 39 (1987)
Issue (Month): 2 (June)
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