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| Title: | | The threat of capital drain: a rationale for public banks?  |
| Authors: | | Hakenes, Hendrik Schnabel, Isabel |
| Issue Date: | | 2006 |
| Series/Report no.: | | Preprints of the Max Planck Institute for Research on Collective Goods 2006,11 |
| Abstract: | | This paper yields a rationale for why subsidized public banks may be desirable from a regional perspective in a financially integrated economy. We present a model with credit rationing and heterogeneous regions in which public banks prevent a capital drain from poorer to richer regions by subsidizing local depositors, for example, through a public guarantee. Under some conditions, cooperative banks can perform the same function without any subsidization; however, they may be crowded out by public banks. We also discuss the impact of the political structure on the emergence of public banks in a political-economy setting and the role of interregional mobility. |
| Subjects: | | Public banks cooperative banks capital drain credit rationing financial integration privatization |
| JEL: | | G21 F36 H11 L33 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Preprints of the Max Planck Institute for Research on Collective Goods
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