Who Benefits from Credit Subsidies?
We investigate the impact of interest rate subsidies on the total amount of borrowing and on the average cost of borrowing using data on a panel of bank-firm relationships in Italy. Our analysis reveals that subsidies are likely to reach borrowers that would have received finance even without a subsidy, and that they have no significant real effect on lending. The bank administering the program benefits at least partially of the rents they generate and its appropriation is found to be larger the larger its market power and its informational advantage to competitors.
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Volume (Year): 97 (2007)
Issue (Month): 5 (September-October)
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