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The impact of public ownership in the lending sector
Author(s) -
Bose Arup,
Pal Debashis,
Sappington David E. M.
Publication year - 2014
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12109
Subject(s) - welfare , business , profit (economics) , government (linguistics) , monetary economics , labour economics , financial system , market economy , economics , microeconomics , linguistics , philosophy
We examine the effects of increased government ownership of suppliers in the lending sector, which induces increased concern with total welfare and reduced concern with profit. Such increased ownership of a lender can have unanticipated effects. For instance, it can increase lender profit. Furthermore, borrower welfare often declines as government ownership increases in a lender with a relatively limited ability to discern the true quality of borrowers’ projects. In addition, there are settings in which increased government ownership of a lender has no impact on either lender profit or borrower welfare.