This paper builds a binomial general equilibrium model where both secured and unsecured debt contracts are available for trade and analyzes this model to prove the existence and determine the nature of equilibria. In particular, I define a coexistence equilibrium in this economy as an equilibrium that involves trade in at least one asset of each type and study the conditions sufficient to guarantee its existence. This paper combines endogenous leverage with the anonymity of perfectly competitive markets to present a scenario where agents choose to hold two different kinds of debt. I connect this behavior to endowment inequalities that prevent some agents from being able to afford the down payment necessary to access secured credit. Finally, by comparing equilibria across financial structures where only one or both kinds of contracts are available, I also explore the redistributive, portfolio, and asset pricing implications of these results, especially in a world where such inequalities exist.

Financial innovation is the use of new kinds of collateral or new kinds of promises backed by existing collateral. We study the effect of collateral-based financial innovation in a general equilibrium model with incomplete markets and provide precise predictions about cross-price spillovers. Whereas leverage has positive price spillovers on other markets, tranching and credit default swaps have negative price spillovers on other asset markets. Our results underscore a new mechanism (collateral-based financial innovation) that can explain cross-market spillovers without relying on traditional contagion (portfolio/fire-sale) channels.

Distribution networks entrusted to run welfare programs can have enduring leakages due to the expensive monitoring of agents at several echelons. This paper features a technological innovation harnessing low-cost computing that can help to curb leakages and reduce inefficiencies in such complex welfare distribution networks. A phone-based ‘Interactive Voice Response System’ that requires the last-mile distribution agents to report the number of beneficiaries at a very high frequency concurrently with business-as-usual beneficiary information reporting by the middle-tier delivery agents serves as a mechanism for increasing accountability. Using the roll-out of this system, we demonstrate that this innovation reduced leakage in school lunch provision in Bihar, India. While independently collected data highlights improvements in delivery, official statistics indicate a decline in the school lunches provision. We use within Bihar cellular towers location to bolster our identification in an instrumental variable framework.

We study the relationship between alcohol consumption and crime, following an alcoholprohibition in Bihar in 2016. Using a difference-in-differences approach, we explore the differential effects of alcohol on different crime types. We find that the prohibition led to a 0.22 standard deviation point reduction in reported violent crimes without significantly impacting nonviolent crimes. Heterogeneity tests reveal stronger effects in interior districts and those with higher baseline alcohol consumption or fewer religious restrictions on alcohol consumption. Thus, we conclude that the ban affected crime by reducing alcohol availability and consumption, rather than through institutional changes.