The Pervasiveness and Consequences of Market Failure in UK Sub-Prime Credit Markets and Challenges for Social Policy

Résumé fourni par la source

Market failure, around credit provision, typically centres on adverse selection and moral hazard. We utilise a Diverse Economies Framework to distinguish between different types of lender (mainstream, alternative, and non-market) and neoclassical economic theory as an analytic framework to introduce three additional forms of market failure – diseconomies of small scale, externalities, and excess demand and oversupply. This suggests market failure in the UK sub-prime consumer credit market is more comprehensive than previously recognised, increases the argument for government intervention and points to four policy responses – public subsidies, patient capital, regulation, and taxation – to complement and supplement market responses. Without support, not-for-profit sub-prime lenders, such as Community Development Finance Institutions, will continue in their struggle to survive, further exposing an already-vulnerable group of borrowers to even greater debt and associated worse health and wellbeing.

Ce résumé expose les affirmations des auteurs. BNTIC ne l’interprète pas comme une validation indépendante des résultats.