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Do Consumers Really Prefer Formal Credit to Informal Credit? Evidence from a Pseudo-Experimental Design in Mexico

Author

Listed:
  • Víctor Gerardo Carreón Rodríguez

    (Division of Economics, CIDE)

  • Sonia Di Giannatale

    (Division of Economics, CIDE)

  • Jorge L. García-Menéndez

Abstract

The development of economic institutions characterizes economic growth and promotes efficiency. For example, formal credit institutions operate in the credit market in a more efficient way than informal money lenders because they are better in reducing costs associated with financial market operations. Formal credit institutions are desirable . Hence, it is important to analyze how agents choose between formal and informal credit markets. Using data from an intervention that affected the supply and the demand for formal credit in Mexico, we verify that agents transition from the informal to the formal credit markets when they are given access to the latter. In order to do so, we analyze empirical transition matrices and diff-in-diff estimators.

Suggested Citation

  • Víctor Gerardo Carreón Rodríguez & Sonia Di Giannatale & Jorge L. García-Menéndez, 2012. "Do Consumers Really Prefer Formal Credit to Informal Credit? Evidence from a Pseudo-Experimental Design in Mexico," Working papers DTE 542, CIDE, División de Economía.
    • Handle: RePEc:emc:wpaper:dte542
    as

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    File URL: http://www.economiamexicana.cide.edu/RePEc/emc/pdf/DTE/DTE542.pdf
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    References listed on IDEAS

    as
    1. Philippe Aghion, 2005. "Growth and Institutions," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 32(1), pages 3-18, March.
    2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
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    More about this item

    Keywords

    formal and informal credit market; transition; persistance.;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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