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The Distributive Impact Of Reforms In Credit Enforcement: Evidence From Indian Debt Recovery Tribunals

  • Dilip Mookherjee

    ()

    (Department of Economics, Boston University)

  • Ulf von Lilienfeld-Toal

    ()

    (Stockholm School of Economics)

  • Sujata Visaria

    ()

    (Hong Kong University of Science and Technology)

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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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2010-034.

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Length: 66 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:bos:wpaper:wp2010-034
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