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.

Redistribution, Collateral Subsidy and Screening

REITO, FRANCESCO
2011-01-01

Abstract

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.
2011
mutual credit; redistribution; policy intervention
File in questo prodotto:
File Dimensione Formato  
reito - finanzarchiv.pdf

solo gestori archivio

Licenza: Non specificato
Dimensione 404.03 kB
Formato Adobe PDF
404.03 kB Adobe PDF   Visualizza/Apri

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.11769/12322
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 0
  • ???jsp.display-item.citation.isi??? 0
social impact