Besley, Timothy 
ORCID: 0000-0002-8923-6372, Coate, Stephen and Loury, Glenn
(1993)
The economics of rotating savings and credit associations.
American Economic Review, 83 (4).
pp. 792-810.
ISSN 0002-8282
Abstract
This paper analyzes the economic role and performance of a type of financial institution which is observed worldwide: rotating savings and credit associations (Roscas). Using a model in which individuals save for an indivisible durable consumption good, we study Roscas which distribute funds using random allocation and bidding. Each type of Rosca allows individuals without access to credit markets to improve their welfare, but under a reasonable assumption on preferences, random allocation is preferred when individuals have identical tastes. This conclusion need not hold when individuals are heterogeneous. We also discuss the sustainability of Roscas given the possibility of default.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.aeaweb.org/aer/index.php |
| Additional Information: | © 1993 American Economic Association |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G2 - Financial Institutions and Services > G20 - General O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political |
| Date Deposited: | 27 Apr 2007 |
| Last Modified: | 01 Nov 2024 05:11 |
| URI: | http://eprints.lse.ac.uk/id/eprint/1613 |
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