Moral hazard in a voluntary deposit insurance system: Revisited
This paper extends Wheelock and Kumbhakar’s (1995) test for moral hazard in the Kansas deposit insurance system (1910-1920). This paper tests and finds evidence of omitted bank-specific effects. Estimates in Wheelock and Kumbhakar (1995), as a result, are biased. This paper introduces unobserved individual heterogeneity to the test for moral hazard, corrects their estimates, and finds more evidence of moral hazard in the Kansas deposit insurance system.
|Date of creation:||31 May 2007|
|Date of revision:|
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- David C. Wheelock & Paul W. Wilson, 1993.
"Explaining bank failures: deposit insurance, regulation, and efficiency,"
1993-002, Federal Reserve Bank of St. Louis.
- Wheelock, David C & Wilson, Paul W, 1995. "Explaining Bank Failures: Deposit Insurance, Regulation, and Efficiency," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 689-700, November.
- Wheelock, David C & Kumbhakar, Subal C, 1995. "Which Banks Choose Deposit Insurance? Evidence of Adverse Selection and Moral Hazard in a Voluntary Insurance System," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 186-201, February.
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