| Summary/Abstract |
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.
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