Grants Vs . Investment Subsidies
Rai, Ashok S.
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CitationRai, Ashok S., and Tomas Sjöström. “Grants Vs . Investment Subsidies.” CID Working Paper Series 2001.84, Harvard University, Cambridge, MA, December 2001.
AbstractHow should a government intervene to help the credit constrained poor? We study an economy where productivity and wealth are unobserved, and loans must be collateralized. We show that the efficient policy typically consists of offering both a grant and an investment subsidy. Everybody will take the grant and only the relatively productive will take the subsidy. This policy reduces but does not eliminate investment distortions.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:39612436