First-best debt relief

  • Menzies G
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Abstract

The rationale for debt relief (J. Dev. Econ. 29 (1988) 253) is second best. In a first-best ontract, a debtor who clears a (partly forgiven) debt receives an additional payment from the creditor, called a hyper-incentive . © 2003 Elsevier B.V. All rights reserved.

Author-supplied keywords

  • Debt forgiveness
  • Debt overhang
  • Hyper-incentive contract

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