Overcoming Information Asymmetries in Low-Income Lending: Lessons from the “Working Wheels” Program
Without access to transportation, the welfare-to-work transition is nearly impossible, yet little is known about the effectiveness of programs designed to improve credit access. Since 1998, Vermont's TANF funds have provided automobile loans through the “Working Wheels” program. We use microlevel data from this program to explore how to cost-effectively provide loans to clients who cannot obtain affordable loans elsewhere. Our results verify the importance of relationship lending, particularly among those without documented credit histories. In the presence of information asymmetries about credit history, our results justify the increased trust placed in clients with whom the bank has a stronger relationship; such clients, ceteris paribus, are less likely to default. We conclude that in the current climate of welfare reform, policymakers should consider programs that encourage welfare recipients to establish and maintain relationships with financial institutions in order to facilitate access to credit and minimize the risk of default.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 72 (2005)
Issue (Month): 2 (October)
|Contact details of provider:|| Web page: http://www.southerneconomic.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jaffee, Dwight M & Russell, Thomas, 1984. "Imperfect Information, Uncertainty, and Credit Rationing: A Reply," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 869-72, November.
- O'Regan, Katherine M. & Quigley, John M., 1998.
"Accessibility and Economic Opportunity,"
Berkeley Program on Housing and Urban Policy, Working Paper Series
qt94s780fq, Berkeley Program on Housing and Urban Policy.
- O'Regan, Katherine M. & Quigley, John M., 1997. "Accessibility and Economic Opportunity," University of California Transportation Center, Working Papers qt37h6t700, University of California Transportation Center.
- John M. Quigley & Katherine M. O'Regan, 1998. "Accessibility and Economic Opportunity," Yale School of Management Working Papers ysm100, Yale School of Management.
- Steven Raphael & Lorien Rice, 2000.
"Car Ownership, Employment, and Earnings,"
JCPR Working Papers
179, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Milde, Hellmuth & Riley, John G, 1988.
"Signaling in Credit Markets,"
The Quarterly Journal of Economics,
MIT Press, vol. 103(1), pages 101-29, February.
- Perraudin, William R M & Sorensen, Bent E, 1992. "The Credit-Constrained Consumer: An Empirical Study of Demand and Supply in the Loan Market," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 179-92, April.
- Blackwell, David W & Winters, Drew B, 1997. "Banking Relationships and the Effect of Monitoring on Loan Pricing," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(2), pages 275-89, Summer.
- Leonard I. Nakamura, 1993. "Recent research in commercial banking: information and lending," Working Papers 93-24, Federal Reserve Bank of Philadelphia.
- Boyes, William J. & Hoffman, Dennis L. & Low, Stuart A., 1989. "An econometric analysis of the bank credit scoring problem," Journal of Econometrics, Elsevier, vol. 40(1), pages 3-14, January.
- Williamson, Stephen D, 1987.
"Costly Monitoring, Loan Contracts, and Equilibrium Credit Rationing,"
The Quarterly Journal of Economics,
MIT Press, vol. 102(1), pages 135-45, February.
- Stephen D. Williamson, 1984. "Costly Monitoring, Loan Contracts and Equilibrium Credit Rationing," Working Papers 572, Queen's University, Department of Economics.
- Allen N. Berger & Gregory F. Udell, 2001.
"Small business credit availability and relationship lending: the importance of bank organizational structure,"
Finance and Economics Discussion Series
2001-36, Board of Governors of the Federal Reserve System (U.S.).
- Allen N. Berger & Gregory F. Udell, 2002. "Small Business Credit Availability and Relationship Lending: The Importance of Bank Organisational Structure," Economic Journal, Royal Economic Society, vol. 112(477), pages F32-F53, February.
- Paul M. Ong, 2002. "Car ownership and welfare-to-work," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 21(2), pages 239-252.
- Holzer Harry J. & Ihlanfeldt Keith R. & Sjoquist David L., 1994. "Work, Search, and Travel among White and Black Youth," Journal of Urban Economics, Elsevier, vol. 35(3), pages 320-345, May.
- Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November.
- Chakravarty, Sugato & Scott, James S, 1999. "Relationships and Rationing in Consumer Loans," The Journal of Business, University of Chicago Press, vol. 72(4), pages 523-44, October.
- Jaffee, Dwight & Stiglitz, Joseph, 1990. "Credit rationing," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 16, pages 837-888 Elsevier.
- Robert B. Avery & Raphael W. Bostic & Paul S. Calem & Glenn B. Canner, 1996. "Credit risk, credit scoring, and the performance of home mortgages," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 621-648.
- Schmid, A. Allan & Robison, Lindon J., 1995. "Applications Of Social Capital Theory," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 27(01), July.
- Stiglitz, Joseph E & Weiss, Andrew, 1992. "Asymmetric Information in Credit Markets and Its Implications for Macro-economics," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 694-724, October.
- Loretta J. Mester, 1997. "What's the point of credit scoring?," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 3-16.
- Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Cole, Rebel A., 1998. "The importance of relationships to the availability of credit," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 959-977, August.
When requesting a correction, please mention this item's handle: RePEc:sej:ancoec:v:72:2:y:2005:p:329-351. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laura Razzolini)
If references are entirely missing, you can add them using this form.