Bankruptcy: Is It Enough to Forgive or Must We Also Forget?

Ronel Elul and Piero Gottardi ()

No ECO2008/41, Economics Working Papers from European University Institute

Abstract: In many countries, lenders are restricted in their access to information about borrowers’ past defaults. We study this provision in a model of repeated borrowing and lending with moral hazard and adverse selection. We analyze its effects on borrowers’ incentives and access to credit, and identify conditions under which it is optimal. We argue that “forgetting” must be the outcome of a regulatory intervention by the government. Our model’s predictions are consistent with the cross-country relationship between credit bureau regulations and provision of credit, as well as the evidence on the impact of these regulations on borrowers’ and lenders’ behavior.

Keywords: Bankruptcy; Information; Incentives; Fresh Start (search for similar items in EconPapers)
JEL-codes: D86 G33 K35 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-law and nep-reg
Date: 2008
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Related works:
Working Paper: Bankruptcy: Is it enough to forgive or must we also forget? (2007)
Working Paper: Bankruptcy: Is it enough to Forgive or must we also Forget? (2008)
Working Paper: Bankruptcy: Is It Enough to Forgive or Must we Also Forget? (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:eui:euiwps:eco2008/41

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