From Participation Gap to Credit Bridging: How an Executable, Auditable Incremental Asset Participation Institution Changes Fragility

Why does the modern economy, after repeated crises, still relapse into the same demand-clearing path—credit expansion → asset prices → balance-sheet sensitivity? The companion paper (Paper I) argues and tests that triggers explain when a crisis erupts, but persistent fragility is generated upstream by a structural generator: the absorption structure of capitalized upside value. Let θ denote the broad sector’s share of absorbed capitalized upside, and define the participation gap as g ≡ 1 − θ. Paper I presents and tests the chain: a widening g → insufficient intertemporal absorption of demand → rising reliance on credit bridging and leverage → leverage drift and the accumulation of tail sensitivity → a higher probability of crisis-style clearing. Yet macro identification faces a persistent obstacle: controlled, plausibly exogenous shifts in θ are rare. This paper (Paper II) closes the loop by studying an institution that encodes incremental asset participation into an executable ruleset and exposes an externally reviewable institutional surface through Minimal Verifiable Data (MVD), timelocked policy bundles, finality cutoffs/attestations, and monotone enforcement (“OnlyDown”). A modular, staggered rollout creates quasi-experimental variation: institutional activation increases a platform-level counterpart θₚlat (shrinking gₚlat) and—within usable periods that satisfy hard-budget, source-purity, and version-consistency constraints—reduces reliance on credit bridging, suppresses leverage-drift proxies, and thins tail event probabilities. Methodologically, we upgrade identification from statistical assumptions to design-induced, testable implications. Finality makes “no anticipation” testable; OnlyDown yields an endogenous placebo: effects should disappear in violation windows when enforcement mechanically tightens or freezes intensity. Hard-budget breaches and version-drift windows are treated as mechanism failures and excluded by pre-locked rules. Conceptually, we align with Paper I’s segmentation: θₚlat/gₚlat is not a relabeling of income/wealth inequality, but a measurable, institutionally shiftable form of the absorption structure of capitalized growth claims. We provide structural–price decompositions and horseraces against platform concentration proxies to reduce mechanical price-effect risks and misreadings. The deliverables include MVD/ReproPack and a minimal cross-institution interface enabling replication, comparability, and falsifiability.