The impact of public ownership in the lending sector |
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| Authors: | Arup Bose Debashis Pal David E M Sappington |
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| Institution: | 1. Theoretical Statistics and Mathematics Unit, Indian Statistical Institute;2. Department of Economics, University of Cincinnati;3. Department of Economics, University of Florida |
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| Abstract: | We examine the effects of increased government ownership of suppliers in the lending sector, which induces increased concern with total welfare and reduced concern with profit. Such increased ownership of a lender can have unanticipated effects. For instance, it can increase lender profit. Furthermore, borrower welfare often declines as government ownership increases in a lender with a relatively limited ability to discern the true quality of borrowers’ projects. In addition, there are settings in which increased government ownership of a lender has no impact on either lender profit or borrower welfare. |
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