Credit market frictions and political failure

• Main Authors: ANEY, Madhav S., GHATAK, Maitreesh, MORELLI, Massimo
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: Adverse selection; Asset liquidation; Market failure; Occupational choice; Political failure; Property rights; Economic Policy
• Online Access: https://ink.library.smu.edu.sg/soe_research/1925
• Institution: Singapore Management University

We study how an excessively favorable regulatory environment for banks could arise even with a perfectly competitive credit market in a median voter world. In our occupational choice model with heterogeneous wealth endowments, market failure due to unobservability of entrepreneurial talent endogenou...