The completion of the European Union single market has rendered the previous system of destination taxation, in which exports were tax-exempt and then taxed at the importing country's rate, unsustainable due to the accompanying abolition of border controls.

Can a bank increase its profi…t by subsidizing inactivity? This paper suggests this may occur, due to the presence of hidden information, in a monopolistic credit market. Rather than offering credit in a pooling contract, a monopolist bank can sort borrowers through an appropriate subsidy to...

Equilibrium credit rationing in the sense of Stiglitz and Weiss (1981) implies the marginal cost of funds to the borrower is infinite. So borrowers have an overwhelming incentive to cut their loan by a dollar and thereby avoiding being rationed. Ways of doing this include scaling down the...

This paper shows that if moral hazard leads to credit rationing, an appropriate usury law must raise social welfare. Under market clearing, a usury law is always beneficial if funds are inelastically supplied. When entrepreneurial heterogeneity is introduced, an improvement arises even when the...