We study an economy where agents are heterogeneous in terms of observablewealth and unobservable talent. Adverse selection forces creditors to ask forcollateral. We study the two-way interaction between rationing in the creditmarket and the wages offered in the labor market. Both pooling and...

We analyze a simple and tractable model of occupational choice in the presence of credit marketimperfections. We examine the effect of parameters governing technology and transaction costs, andhistory, in terms of the initial wealth distribution, in determining the long-term wealth...

This paper analyzes how group lending programs use joint liability to utilize localinformation that borrowers have about each other’s projects through self-selection of groupmembers in the group formation stage. These schemes are shown to lead to positiveassortative matching in group...