The de Soto Effect
Year: 2009
Type: preprint
Abstract: This paper explores the eects of a policy of creating and improving property rights to facilitate the use of …xed assets as collateral, popularly attributed to the in‡uential policy advocate Hernando de Soto, in an equilibrium model of a credit market with moral hazard. We then use data for Sri Lanka to calibrate the eects empirically. Our theoretical analysis shows that these eects are heterogeneous by the wealth level of the borrower and depend on the extent of competition between lenders. Indeed, if competition is absent completely, then improving property rights can actually be welfare decreasing. Our calibration results …nd moderate eects of property rights improvements on interest rates and loan size, but the welfare gains are surprisingly small.
Source: SSRN Electronic Journal
Authors: Timothy Besley, Maitreesh Ghatak
Language: French
Topic: Economic theories and models
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2096710008