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Income-Contingent Loans: Some General Theoretical Considerations, with Applications

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Abstract

Income-contingent loan programs run by governments represent an important social innovation, an improvement over previous mechanisms for funding investment such as education and now showing its merits in a host of other arenas. This paper, and the other papers presented in this session, lay out the theory of income-contingent loans and describe experiences with this type of program in education and other areas.

Keywords

  • Moral Hazard
  • Unemployment Insurance
  • Student Loan
  • Contemporary Issue
  • Loan Program

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

University Professor, Columbia University. This is a revised version of a paper originally presented at an IEA/World Bank Roundtable on Shared Prosperity, Jordan, June, 2014, and part of a special session on Income-Contingent Loans, reporting on some of the results of an earlier International Economic Association Roundtable on Income-Contingent Loans, the proceedings of which are available as Chapman et al. (2014). See the papers in that volume for references to the relevant literature upon which this paper was based. (See also the introduction and summary in that volume.) The work reported here focuses in particular on joint work with Jungyoll Yun on the use of income-contingent loans for unemployment. I am deeply indebted to him, to the participants in the earlier Bangkok Roundtable on income-contingent loans, and above all to Bruce Chapman and Timothy Higgins for organizing both the Roundtable and the session in which this paper was presented.

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References

  • Chapman, B. (2010) “Policy Design Issues for Risk Management: Adverse Selection and Moral Hazard in the Context of Income Contingent Loans,” in G. Marston, J. Moss and J. Quiggin (eds), Risk, Welfare and Work, Carlton, Australia: Melbourne University Press, pp. 233–52.

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© 2016 Joseph E. Stiglitz

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Stiglitz, J.E. (2016). Income-Contingent Loans: Some General Theoretical Considerations, with Applications. In: Stiglitz, J.E., Guzman, M. (eds) Contemporary Issues in Microeconomics. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137529718_7

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