Martin, Alberto; Taddei, Filippo - In: Journal of International Economics 89 (2013) 2, pp. 441-452
The financial crisis of 2007–08 has underscored the importance of adverse selection in financial markets. This friction … effects of limited pledgeability. In this paper, we fill this gap by developing a standard growth model with adverse selection …. Our main results are that, by fostering unproductive investment, adverse selection: (i) leads to an increase in the …