Under adverse selection, redlining of borrowers may occur when their wealth is notsufficient to reach the collateral needed by creditors to separate types. In this paper,potential entrepreneurs can join in a peer group and voluntarily decide to collect andredistribute their endowments. If the fund is not enough to give everyone the amountof collateral that allows for a separation of types, this paper suggests that the governmentshould intervene with a subsidy on the collateral. This policy produces a uniqueseparating equilibrium and is the optimal intervention in the setup analyzed.
|Titolo:||Redistribution, Collateral Subsidy and Screening|
|Autori interni:||REITO, FRANCESCO|
|Data di pubblicazione:||2011|
|Appare nelle tipologie:||1.1 Articolo in rivista|