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Persistent link: https://www.econbiz.de/10001972596
The success of joint liability programs depends on nature and composition of borrowing groups. Group formation is a costly process and in our model these costs vary with the social identity of group partners. We show that risk heterogeneity in a borrowing group may arise due to the social...
Persistent link: https://www.econbiz.de/10013136891
The joint liability literature claims that positive assortative matching, or risk homogeneity, is always the first best solution. We examine this claim in presence of group formation costs and find that the assertion is not always true
Persistent link: https://www.econbiz.de/10013136892