Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83380
Authors: 
Janda, Karel
Year of Publication: 
2011
Series/Report no.: 
IES Working Paper 18/2011
Abstract: 
Provision of credit guarantees or subsidies may remove an adverse selection leading to credit rationing. This paper concentrates on comparison of government budget costs of credit guarantees and subsidies in a monopolistic credit market. Different opportunity costs among entrepreneurs, which reflect different mixes of general and human specific capital, generate different outcomes in the model. As long as the participation costs of low-risk entrepreneurs are sufficiently close to the participation costs of high-risk entrepreneurs, the budget-cost minimizing government should prefer guarantees over interest rate subsidies as an intervention instrument.
Subjects: 
credit
subsidies
guarantees
JEL: 
D82
G18
H25
Document Type: 
Working Paper
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