Wealth inequality, unequal opportunities and inefficient credit market

Coco, Giuseppe ; Pignataro, Giuseppe (2012) Wealth inequality, unequal opportunities and inefficient credit market. Bologna: Dipartimento di Scienze economiche - DSE, p. 42. DOI 10.6092/unibo/amsacta/3708. In: Quaderni - Working Paper DSE (851). ISSN 2282-6483.
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Abstract

This paper investigates the impact of heterogeneous wealth on credit allocation from an egalitarian opportunity and an efficiency point of view. Under asymmetric information on both wealth and the responsibility variable there is no trade-off between equality and efficiency, actually wealth inequality delivers both inequality of opportunity and inefficiency. Due to decreasing absolute risk aversion, poor entrepreneurs, other things equal, realize better projects. This notwithstanding, due to the bidimensional hidden information, they may be rationed out or obtain a loan only at the cost of cross subsidizing bad projects realized by rich entrepreneurs. In the first case inefficiency arises in the form of insufficient investment, in the second in the form of inefficient projects being realized. An egalitarian redistribution of endowments may lead to perfect screening, no inefficiencies in the allocation of credit and equality of opportunity.

Abstract
Tipologia del documento
Monografia (Working paper)
Autori
AutoreAffiliazioneORCID
Coco, Giuseppe
Pignataro, Giuseppe
Parole chiave
Wealth, Credit, Cross-subsidization, DARA, Equality of Opportunity
Settori scientifico-disciplinari
ISSN
2282-6483
DOI
Data di deposito
21 Giu 2013 10:57
Ultima modifica
22 Gen 2014 15:27
URI

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