Delegated Screening: Evidence from Government-Backed Loans (with Felipe Brugués, Thi Mai Anh Nguyen, and Sebastián Vélez)
Rebecca De Simone, University of Michigan
Government guarantees are a ubiquitous policy tool, leveraging intermediaries' informational advantage to allocate credit, yet they introduce a fundamental agency conflict: by insulating lenders from losses, they undermine the incentive to screen and distort product choice towards intermediaries' private benefits. This paper examines the power of dynamic incentives in mitigating both frictions. In the context of a large government-backed credit program in Colombia, we find evidence that lenders conduct less screening and take on greater risk with government-backed loans than with their traditional products. However, this tendency is mitigated by a dynamic quota-and-fee mechanism employed by the program.
| Building: | North Quad |
|---|---|
| Website: | |
| Event Type: | Workshop / Seminar |
| Tags: | Economics, Industrial Organization, seminar |
| Source: | Happening @ Michigan from Department of Economics, Applied Microeconomics/Industrial Organization, Department of Economics Seminars |
