Social Capital and Financial Credit Markets: Credit Demand in Mexico, 2010

Produced by: 
Universidad Nacional Autónoma de México
Available from: 
August 2015
Paper author(s): 
Ernesto Zepeda
Juan Antonio Leos
Félix Carvallo
Topic: 
Financial Economics
Year: 
2016

In the presence of market failures, people need to find acceptable mechanisms to reduce uncertainty and maximize potential benefits. Because the principal failure is the asymmetry of information available, people resort to channels that transmit information to compensate for these drawbacks. These channels are networks of social relationships. This phenomenon is referred to as Social Capital, the network of people that an individual possesses, and whose use could bring about benefits. In the case of the financial market (especially the credit market), people make use of Social Capital when making decisions within the market. Through a series of linear models, drawing on data from wvs-2010 and enigh-2010, it was found that credit demand responds to a few variables that indicate individuals’ perceptions of their environment (information).

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