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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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  1. Philippe Aghion & Robin Burgess & Stephen Redding & Fabrizio Zilibotti, 2006. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," NBER Working Papers 12031, National Bureau of Economic Research, Inc.
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  6. Bovenberg, A.L. & Gordon, R.H., 1996. "Why is capital so immobile internationally? Possible explanation and implications for capital income taxation," Other publications TiSEM 6a131c21-fd9a-4d83-8d9a-7, School of Economics and Management.
  7. Satyajit Chatterjee & Dean Corbae & Makoto Nakajima & José-Víctor Ríos-Rull, 2007. "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default," Econometrica, Econometric Society, vol. 75(6), pages 1525-1589, November.
  8. Bruno Biais & Thomas Mariotti, 2009. "Credit, Wages, and Bankruptcy Laws," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 939-973, 09.
  9. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
  10. Sujata Visaria, 2009. "Legal Reform and Loan Repayment: The Microeconomic Impact of Debt Recovery Tribunals in India," American Economic Journal: Applied Economics, American Economic Association, vol. 1(3), pages 59-81, July.
  11. Igor Livshits & James MacGee & Michele Tertilt, 2005. "Consumer Bankruptcy: A Fresh Start," Discussion Papers 04-011, Stanford Institute for Economic Policy Research.
  12. Christopher James & David C. Smith, 2000. "Are Banks Still Special? New Evidence on Their Role in the Corporate Capital-Raising Process," Journal of Applied Corporate Finance, Morgan Stanley, vol. 13(1), pages 52-63.
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