Corruption in a model of vertical linkage between formal and informal credit sources and credit subsidy policy |
| |
Authors: | Sarbajit Chaudhuri Krishnendu Ghosh Dastidar |
| |
Institution: | aDepartment of Economics, University of Calcutta, B.T. Road, Kolkata 7000, India;bCESP, School of Social Sciences, Jawaharlal Nehru University, New Delhi 110067, India |
| |
Abstract: | The present note develops a model of vertical linkage between the formal and informal credit markets highlighting the presence of corruption in the distribution of formal credit. The existing dominant moneylender, the bank official and the new moneylenders move sequentially. The existing moneylender acts as a Stackelberg leader and unilaterally decides on the informal interest rate. We show that there may arise a case where an increase in the supply of formal credit results in an increase in the informal interest rate under reasonable parametric restrictions. This shows that apart from (i) asymmetric information on the part of informal sector lenders (Bose, 1998), (ii) an increase in the probability of default of all informal sector lenders (Hoff and Stiglitz 1997), and the (iii) possibility of informal lenders to collude (Floro and Ray 1997), the presence of corruption in the distribution of formal credit might be another factor responsible for the policy of vertical linkage to break down. |
| |
Keywords: | JEL classifications: O16 O17 |
本文献已被 ScienceDirect 等数据库收录! |
|