Credit market frictions and political failure

• 成果类型: Article
• 署名作者: Aney, Madhav S.; Ghatak, Maitreesh; Morelli, Massimo
• 署名单位: Singapore Management University; University of London; London School Economics & Political Science; Bocconi University; Bocconi University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2016.03.012
• 发表日期: 2016
• 页码: 48-64
• 关键词: Occupational choice; adverse selection; property rights; Asset liquidation; Political Failure; market failure

摘要

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 endogenously creates a misalignment between surplus maximizing reforms and reforms that are preferred by the median voter, who is a worker. This is in contrast to the world without market failure where the electorate unanimously vote in favor of surplus maximizing institutional reforms. This paper illustrates how market failure could lead to political failure even in the benchmark political system that is free from capture by interest groups. (C) 2016 Elsevier B.V. All rights reserved.