Credit Rationing and Payment Incentives

Franklin Allen

The Review of Economic Studies, 1983, vol. 50, issue 4, 639-646

Abstract: A model of borrowing for production is presented where default leads to exclusion from the capital market. This means contracts are enforceable, provided the current payment is less than or equal to the value of future access to the capital market. The main result of the paper is to show that if this constraint binds then credit is rationed.

Date: 1983
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:50:y:1983:i:4:p:639-646.

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