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Unformatted text preview: proved access to collateral reduces the risk premium on lending and thus, reduces the cost of borrowing (interest rate) faced by the borrower this can encourage investment (ii) with credit market imperfections collateral can reduce agency problems can improve access to credit, for example, by reduc-ing credit rationing encourage investment 4.1 Acemoglu et al. (2001) Colonial Origins of Comparative Development In places where Europeans could not settle due to high mortality, they were more likely to set up extractive institutions Development Economics, LSE Summer School 2007 64...
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- Spring '10