Behavioral impact of debt-output nexus in joint liability group lending: evidence from the Israeli Moshavim

The Israeli Moshavim were agricultural cooperative associations grouped into regional procurement associations, operated under a mechanism of joint liability lending until the 1985 debt-crisis. Unique historical financial-panel-data offers behavioural insights into the joint liability group lending,...

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Bibliographic Details
Published in:Israel affairs 2021-05, Vol.27 (3), p.558-576
Main Authors: Barel-Shaked, Sagit, Lipshits, Rachel
Format: Article
Language:English
Subjects:
Accountability
Agricultural cooperatives
Behavior change
Cooperation
Creditors
Debt
debt aversion
Economic crisis
exponential distribution
Israel
Joint liability group lending
Liability
moshavim
Optimism
Panel data
Public debt
risk receptiveness
semi-parametric
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Summary:The Israeli Moshavim were agricultural cooperative associations grouped into regional procurement associations, operated under a mechanism of joint liability lending until the 1985 debt-crisis. Unique historical financial-panel-data offers behavioural insights into the joint liability group lending, through constructing Moshavim's Debt-To-Output (DTO) ratio distribution. The right-tailed exponential distribution captures the finding that a small portion of the Moshavim were debtors. A semi-parametric model synthesises between the debtors and the creditors. While a joint liability mechanism might boost risk-receptiveness and excessive optimism concerning the peer's accountability for some, it carries a reversed effect for others. Thus, the failure of the mechanism might be unavoidable.
ISSN:1353-7121
1743-9086
DOI:10.1080/13537121.2021.1915551