EconStor >
Verein für Socialpolitik >
Ausschuss für Entwicklungsländer, Verein für Socialpolitik >
Proceedings of the German Development Economics Conference, 2007 (Göttingen) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/19874
  
Title:Cosigners Help PDF Logo
Authors:Rai, Ashok S.
Klonner, Stefan
Issue Date:2007
Series/Report no.:Proceedings of the German Development Economics Conference, Göttingen 2007 / Verein für Socialpolitik, Research Committee Development Economics 18
Abstract:We investigate how well social collateral does as an alternative to traditional physical collateral. We do so by studying cosigned loans - a borrower´s loan is backed by the personal guarantee of a cosigner. We use a regression discontinuity approach with data from South Indian bidding Roscas. Our main finding is that cosigners do indeed provide social collateral: doubling the number of cosigners halves the probability of arrears for high risk borrowers. We then distinguish between different theories of social collateral. Cosigners may be e¤ective as a monitoring device (a borrower would pay to rid herself of the nuisance of a cosigner) or as an insurance device (a borrower would pay for the benefit of a cosigner). We show that these two interpretations of cosigning have different empirical predictions in the context of a bidding Roscas. We find support for the insurance role of cosigners.
Subjects:credit
default
cosigner
rosca
JEL:G21
O16
D82
Document Type:Conference Paper
Appears in Collections:Proceedings of the German Development Economics Conference, 2007 (Göttingen)

Files in This Item:
File Description SizeFormat
Klonner.pdf228.24 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/19874

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.