Does the insurance effect of public and private transfers favor financial deepening? evidence from rural Nicaragua
AbstractThe literature suggests Conditional Cash Transfers (CCT) and remittances may protect poor households from income risk. We present a theoretical framework that explores how this ‘insurance’ effect can change households’ decision to apply for a loan via changes in credit demand and supply. Empirical evidence from poor rural households in Nicaragua shows CCTs did not affect loan requests while remittances increased them. The risk protection provided by remittances seems stronger, relative to CCTs, such that improvements on borrowers’ expected marginal returns to a loan or on creditworthiness more than offset decreasing returns to additional income. This suggests those transfers that best protect households from income risk favor financial deepening in the context of segmented markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 38339.
Date of creation: 13 Feb 2012
Date of revision:
Credit markets; migration; conditional cash transfers; Nicaragua;
Find related papers by JEL classification:
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- D14 - Microeconomics - - Household Behavior - - - Personal Finance
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-05-08 (Agricultural Economics)
- NEP-ALL-2012-05-08 (All new papers)
- NEP-IAS-2012-05-08 (Insurance Economics)
- NEP-MFD-2012-05-08 (Microfinance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kochar, Anjini, 1997. "An empirical investigation of rationing constraints in rural credit markets in India," Journal of Development Economics, Elsevier, vol. 53(2), pages 339-371, August.
- Grasdal, A., 2001.
"The Performance of Sample Selection Estimators to Control for Attrition Bias,"
Norway; Department of Economics, University of Bergen
225, Department of Economics, University of Bergen.
- Astrid Grasdal, 2001. "The performance of sample selection estimators to control for attrition bias," Health Economics, John Wiley & Sons, Ltd., vol. 10(5), pages 385-398.
- Grasdal, A., 2000. "The Performance of Sample Selection Estimators to Control for Attrition Bias," Norway; Department of Economics, University of Bergen 0101, Department of Economics, University of Bergen.
- Conning, Jonathan & Udry, Christopher, 2007.
"Rural Financial Markets in Developing Countries,"
Handbook of Agricultural Economics,
- de Janvry, Alain & Finan, Frederico & Sadoulet, Elisabeth, 2004.
"Can Conditional Cash Transfers Serve as Safety Nets to Keep Children at School and Out of the Labor Market?,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt5fp0g5p2, Department of Agricultural & Resource Economics, UC Berkeley.
- de Janvry, Alain & Finan, Frederico & Sadoulet, Elisabeth & Vakis, Renos, 2004. "Can conditional cash transfers serve as safety nets to keep children at school and out of the labor market?," CUDARE Working Paper Series 0999, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Bell, Clive, 1988. "Credit markets and interlinked transactions," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 16, pages 763-830 Elsevier.
- Mendola, Mariapia, 2008.
"Migration and technological change in rural households: Complements or substitutes?,"
Journal of Development Economics,
Elsevier, vol. 85(1-2), pages 150-175, February.
- Mariapia MENDOLA, 2005. "Migration and technological change in rural households: complements or substitutes?," Departmental Working Papers 2005-15, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Fafchamps, Marcel & Gubert, Flore, 2007.
"The formation of risk sharing networks,"
Journal of Development Economics,
Elsevier, vol. 83(2), pages 326-350, July.
- Marcel Fafchamps & Flore Gubert, 2005. "The Formation of Risk Sharing Networks," Working Papers DT/2005/13, DIAL (Développement, Institutions et Mondialisation).
- Marcel Fafchamps & Flore Gubert, 2005. "The Formation of Risk Sharing Networks," Economics Series Working Papers GPRG-WPS-037, University of Oxford, Department of Economics.
- Alderman, Harold & Hoddinott, John, 2007. "Growth-promoting social safety nets:," 2020 vision briefs BB16 Special Edition, International Food Policy Research Institute (IFPRI).
- Gubert, Flore & Fafchamps, Marcel, 2007. "The Formation of Risk Sharing Networks," Economics Papers from University Paris Dauphine 123456789/4392, Paris Dauphine University.
- J. Edward Taylor & Scott Rozelle & Alan deBrauw, 1999. "Migration, Remittances, and Agricultural Productivity in China," American Economic Review, American Economic Association, vol. 89(2), pages 287-291, May.
- Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.