Type: Working Paper
Bankruptcy: Is It Enough to Forgive or Must We Also Forget?
Working Paper, EUI ECO, 2008/41
ELUL, Ronel, GOTTARDI, Piero, Bankruptcy: Is It Enough to Forgive or Must We Also Forget?, EUI ECO, 2008/41 - https://hdl.handle.net/1814/9974
Retrieved from Cadmus, EUI Research Repository
In many countries, lenders are restricted in their access to information about borrowers’ past defaults. We study this provision in a model of repeated borrowing and lending with moral hazard and adverse selection. We analyze its effects on borrowers’ incentives and access to credit, and identify conditions under which it is optimal. We argue that “forgetting” must be the outcome of a regulatory intervention by the government. Our model’s predictions are consistent with the cross-country relationship between credit bureau regulations and provision of credit, as well as the evidence on the impact of these regulations on borrowers’ and lenders’ behavior.
Cadmus permanent link: https://hdl.handle.net/1814/9974
Series/Number: EUI ECO; 2008/41
Publisher: European University Institute
Keyword(s): Bankruptcy Information Incentives Fresh Start D86 G33 K35
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