Besley, Timothy 
ORCID: 0000-0002-8923-6372, Burchardi, Konrad B. and Ghatak, Maitreesh ORCID: 0000-0002-0126-0897
(2012)
Incentives and the De Soto Effect.
Quarterly Journal of Economics, 127 (1).
pp. 237-282.
ISSN 0033-5533
Abstract
This paper explores the consequences of improving property rights to facilitate the use of fixed assets as collateral, popularly attributed to the influential policy advocate Hernando de Soto. We use an equilibrium model of a credit market with moral hazard to characterize the theoretical effects and also develop a quantitative analysis using data from Sri Lanka. We show that the effects are likely to be nonlinear and heterogeneous by wealth group. They also depend on the extent of competition between lenders. There can be significant increases in profits and reductions in interest rates when credit markets are competitive. However, since these are due to reductions in moral hazard, that is, increased effort, the welfare gains tend to be modest when cost of effort is taken into account. Allowing for an extensive margin where borrowers gain access to the credit market can make these effects larger depending on the underlying wealth distribution.
| Item Type: | Article |
|---|---|
| Official URL: | http://qje.oxfordjournals.org/ |
| Additional Information: | © 2012 The Authors |
| Divisions: | STICERD |
| Subjects: | H Social Sciences > HB Economic Theory |
| JEL classification: | D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q15 - Land Ownership and Tenure; Land Reform; Land Use; Irrigation |
| Date Deposited: | 13 Feb 2012 16:51 |
| Last Modified: | 06 Nov 2024 08:24 |
| URI: | http://eprints.lse.ac.uk/id/eprint/41879 |
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