Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26895
Authors: 
Hakenes, Hendrik
Schnabel, Isabel
Year of Publication: 
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

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