Does credit rationing imply insufficient lending ?
نویسندگان
چکیده
By combining hidden types and hidden action, this paper shows that the existence of credit rationing need not imply that lending exceeds the full-information level. In this plausible class of models, the appropriate policy is not to subsidise or tax lending but to make alternatives to entrepreneurship more attractive. Doing so may actually increase the number of those borrowing to set up their own business and yield a strict Pareto improvement. The results extend to equilibria characterised by redlining. So, if interest rates fail to clear credit markets, it does not follow that policy should make loans easier to obtain. 2000 Elsevier Science S.A. All rights reserved.
منابع مشابه
Credit rationing with symmetric information
Without denying the importance of asymmetric information, this article purports the view that credit rationing may also originate from a lender’s inability to classify loan applications into proper risk categories. Although particularly prominent when novel technologies or novel institutional arrangements arise, lack of appropriate categories may affect any request of money lending, making cred...
متن کاملRelationships and Rationing in Consumer Loans: Evidence from the Nineties
Using a national survey data where the event of individual households being refused loans (credit rationed) by financial institutions -as well as the specific loans for which they were turned down -is observed directly, this study investigates both the role of relationships on credit rationing in the nineties and the differential role of relationships across credit rationing in various consumer...
متن کاملA darker side to decentralized banks: Market power and credit rationing in SME lending
We use loan-level data to study how the organizational structure of banks impacts small business lending. We find that decentralized banks—where branch managers have greater autonomy over lending decisions—give larger loans to small firms and those with ‘‘soft information.’’ However, decentralized banks are also more responsive to their own competitive environment. They are more likely to expan...
متن کاملCredit Rationing and Crowding out during the Industrial Revolution: Evidence
Why was growth so slow during the British Industrial Revolution? More than a decade ago, Jeff Williamson proposed "crowding-out" as a result of Britain's numerous wars as a key mechanism, but little empirical evidence existed to support it. We argue that examinations of interest rates are fundamentally misguided. The eighteenthand early nineteenth-century private loan market balanced through qu...
متن کاملCredit Rationing, Bankruptcy Cost, and Optimal Debt Contract for Small Business
This paper examines the relationship between debt contract and the process of resolving financial distress, through either debt restructuring or bankruptcy procedure. It effectively justifies the popularity of the standard debt contract by demonstrating that the standard debt contract is the optimal debt contract for small business with the costly random verification scheme. Although this resul...
متن کامل