14 May 2025
- Title: Credit rationing in unsecured debt markets
- Speaker: Professor Yiannis Vailakis, University of Glasgow
- Location: 3 East, Room 2.2
- Time: 2.45pm – 4pm
About this seminar
In this seminar, Professor Yiannis Vailakis will discuss the below research:
We revisit the welfare properties of competitive credit markets with endogenous debt limits that arise from limited commitment. We introduce a novel concept of constrained efficiency to encompass economies where market interest rates influence default values and participation constraints. We explore this concept through a baseline economy featuring heterogeneous agents with cyclical endowments. The analysis shows that the efficiency of market equilibria and welfare outcomes are sensitive to the nature of default punishments. It suggests that laissez-faire debt limits, while supportive of risk-sharing, might not always optimize welfare. The study illustrates how credit rationing — tightening future debt limits — can enhance current risk-sharing and overall welfare. This occurs because such interventions influence market interest rates and the default option’s value, thereby affecting agents’ present consumption and saving choices, and enabling a more efficient allocation of resources.
To be arranged
This seminar has been postponed. We will update this page with a new time and date soon.
- Title: Public Service Delivery, Exclusion, and Externalities: Theory and Experimental Evidence from India
- Speaker: Professor Maitreesh Ghatak, London School of Economics
- Location: Room 2.2, 3 East
- Time: 2.45pm – 4pm
About this seminar
Professor Maitreesh Ghatak will discuss the research work outlined below.
This study explores the interaction between the quality of public services, the implementation of user fees, and the resulting potential for exclusion, that can lead to negative externalities. Our theoretical framework takes account of the possible externalities that result from excluded users accessing alternative options in the context of sanitation, i.e., open defecation, and challenges the conventional wisdom that higher quality unequivocally leads to increased use. Instead, it highlights the ambiguity that results from a simultaneous increase in usage due to improved services (quality effect) and a decrease caused by the fees (price-elasticity effect). We then provide empirical evidence from a randomized controlled trial, where we incentivized the quality of water and sanitation services in the two largest cities of Uttar Pradesh, India. We show that higher service quality increases fee compliance but excludes some users, leading to unintended negative health externalities. Our detailed data provides evidence that results are driven by changes in caretaker behaviour. This finding highlights the need to be cautious regarding user fees, especially for public services involving significant externalities, and in settings where the users are very poor.
Please contact Professor Ajit Mishra if you would like to join for lunch or dinner or meet with Maitreesh during the day.