Competition, property rights and credit

Better property rights should improve credit availability. The reason is that collateral is more credible and better secured. This a weel accepted reason for which many authorities have encouraged developing economies to assert better property rights. And now Timothy Besley and Maitreesh Ghatak come and tell us we may be all wrong.

Indeed, when there is little competition on credit markets, better registration of property rights allows creditors to foreclose more easily, too easily. If authorities are unwilling to curtail this market power, the focus on better property rights is not warranted. As so often, development issues boil down to market size and competition.