Abstract

http://ssrn.com/abstract=296502
 
 

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Delayed Formal Credit, Bribing and the Informal Credit Market in Agriculture: A Theoretical Analysis


Sarbajit Chaudhuri


University of Calcutta

Manash Ranjan Gupta


Indian Statistical Institute, New Delhi - Economic Research Unit; Jadavpur University


Journal of Development Economics, Vol. 51, No. 2, 1996

Abstract:     
The paper presents a theory of interest rate determination in the informal credit market in backward agriculture. The market for informal credit is created by the delay in disbursement of formal credit. The delay is controlled by the official of the formal credit agency, and he is bribed by the farmer to reduce the delay. The official and the moneylender play a non-cooperative game in choosing the bribing rate and the informal interest rate, respectively. The informal sector interest rate and the effective formal sector interest rate (incorporating the bribe) are equal in equilibrium. Agricultural price and credit subsidy policies may raise the interest rate in the informal credit market.

Keywords: Farmer, Moneylender, Formal credit, Bribery, Interest rate, Subsidy policy, Nash equilibrium

JEL Classification: Q15; D89

Accepted Paper Series


Not Available For Download

Date posted: January 27, 2002  

Suggested Citation

Chaudhuri, Sarbajit and Gupta , Manash Ranjan, Delayed Formal Credit, Bribing and the Informal Credit Market in Agriculture: A Theoretical Analysis. Journal of Development Economics, Vol. 51, No. 2, 1996. Available at SSRN: http://ssrn.com/abstract=296502

Contact Information

Sarbajit Chaudhuri (Contact Author)
University of Calcutta ( email )
56A, B.T. Road
Kolkata, West Bengal 700 050
India
+91 33 2557 5082 (Phone)
+91 33 2844 1490 (Fax)
HOME PAGE: http://econpapers.repec.org/RAS/pch11.htm
Manash Ranjan Gupta
Indian Statistical Institute, New Delhi - Economic Research Unit ( email )
203 B. T. Road
Calcutta, 700 035
India
091-033-577-8893 (Phone)
091-033-577-3040 (Fax)
Jadavpur University ( email )
Department of Economics
Calcutta - 700032
India
033-4726328 (Phone)
033-4731484,4734266 (Fax)
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