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Sastry's 10-year study of New Orleans Katrina evacuees shows demographic differences between returning and nonreturning

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Deirdre Bloome wins ASA award for work on racial inequality and intergenerational transmission

Bob Willis awarded 2015 Jacob Mincer Award for Lifetime Contributions to the Field of Labor Economics

David Lam is new director of Institute for Social Research

Elizabeth Bruch wins Robert Merton Prize for paper in analytic sociology

Next Brown Bag

Monday, Oct 12
Joe Grengs, Policy & Planning for Social Equity in Transportation

Refinancing and decentralization: Evidence from China

Publication Abstract

Park, Albert F., and M.G. Shen. 2008. "Refinancing and decentralization: Evidence from China." Journal of Economic Behavior & Organization, 66(3-4): 703-730.

Decentralization can complement market liberalization by strengthening incentives of agents to respond to market signals. However, in China banks centralized lending authority following financial reforms in the mid-1990s. We present a new theory of financial decentralization in which centralization provides a credible commitment not to refinance bad projects by reducing available information. Using data from Chinese rural financial institutions, we empirically assess the determinants of decentralization and the likelihood of collateral seizure, strongly confirming the predictions of the refinancing model. We conclude that weak institutional environments may limit the efficiency of financial intermediation despite financial market liberalization. (c) 2007 Published by Elsevier B.V.

DOI:10.1016/j.jebo.2006.06.013 (Full Text)

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