Trade and financial liberalization with asymmetric information in bank financing
We investigate trade and financial openness in a small developing country where entrepreneurs need bank financing to operate in an import-competing sector but banks do not observe their ability. This informational asymmetry causes adverse selection of low-ability individuals into entrepreneurship and also prevents poor but able individuals from being entrepreneurs. We find that trade opening improves national welfare, but a tax is needed on foreign financial capital. Trade opening reduces an income gap between the rich and the poor, while financial opening affects this income gap ambiguously.
Volume (Year): 6 (2003)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/GPRE19|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/GPRE19|
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.:
- Harry Flam & Robert W. Staiger, 1989.
"Adverse Selection in Credit Markets and Infant Industry Protection,"
NBER Working Papers
2864, National Bureau of Economic Research, Inc.
- Flam, H. & Staiger, R.W., 1989. "Adverse Selection In Credit Markets And Infant Industry Protection," Papers 432, Stockholm - International Economic Studies.
- Kletzer, Kenneth & Bardhan, Pranab, 1987.
"Credit markets and patterns of international trade,"
Journal of Development Economics,
Elsevier, vol. 27(1-2), pages 57-70, October.
- Kenneth Kletzer and Pranab Bardhan., 1986. "Credit Markets and Patterns of International Trade," Economics Working Papers 8612, University of California at Berkeley.
- Kletzer, Kenneth & Bardhan, Pranab, 1986. "Credit Markets and Patterns of International Trade," Department of Economics, Working Paper Series qt1g36f3sd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Gertler, Mark & Rogoff, Kenneth, 1990. "North-South lending and endogenous domestic capital market inefficiencies," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 245-266, October.
- repec:tpr:qjecon:v:103:y:1988:i:4:p:767-87 is not listed on IDEAS
- Dixit, Avinash K, 1989. "Trade and Insurance with Adverse Selection," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 235-47, April.
- Grossman, Gene, 1999.
"Imperfect Labour Contracts and International Trade,"
CEPR Discussion Papers
2240, C.E.P.R. Discussion Papers.
- Gene M. Grossman, 1999. "Imperfect Labor Contracts and International Trade," NBER Working Papers 6901, National Bureau of Economic Research, Inc.
- Grossman, G.M., 1998. "Imperfect Labour Contracts and International Trade," Papers 205, Princeton, Woodrow Wilson School - Public and International Affairs.
- Ben Bernanke & Mark Gertler, 1987.
"Financial Fragility and Economic Performance,"
NBER Working Papers
2318, National Bureau of Economic Research, Inc.
- Bond, Eric W., 1986. "Entrepreneurial ability, income distribution, and international trade," Journal of International Economics, Elsevier, vol. 20(3-4), pages 343-356, May.
- Bagwell, Kyle & Staiger, Robert W., 1989.
"The role of export subsidies when product quality is unknown,"
Journal of International Economics,
Elsevier, vol. 27(1-2), pages 69-89, August.
- Kyle Bagwell & R. Staiger, 1987. "The Role of Export Subsidies When Product Quality is Unknown," Discussion Papers 758, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kyle Bagwell & Robert W. Staiger, 1988. "The Role Of Export Subsisies When Product Quality Is Unknown," NBER Working Papers 2584, National Bureau of Economic Research, Inc.
- Gene M. Grossman & Henrik Horn, 1987.
"Infant-Industry Protection Reconsidered: The Case of Informational Barriers to Entry,"
NBER Working Papers
2159, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:taf:jpolrf:v:6:y:2003:i:2:p:57-69. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.