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Macroeconomics of Microfinance

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Author Info

  • Yongseok Shin

    (Wash. U. in St. Louis)

  • Joseph P. Kaboski

    (U. of Notre Dame and NBER)

  • Francisco J. Buera

    (UCLA and NBER)

Abstract

This paper provides a quantitative evaluation of the aggregate and distributional impacts of economy-wide microfinance or other credit programs targeted toward small-scale entrepreneurs. In our analysis, we find that the redistributive impacts of microfinance are stronger in general-equilibrium, but the aggregate impacts are smaller. Making the typical microfinance program more widely available has a negligible impact on per-capita income, since an increase in aggregate total factor productivity(TFP) is offset by lower capital accumulation that stems from redistributing income from individuals with high saving rates to those with low saving rates. However, the welfare impact is uniformly positive except for those few that are extremely talented and/or wealthy.

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File URL: http://www.economicdynamics.org/meetpapers/2011/paper_545.pdf
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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 545.

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Date of creation: 2011
Date of revision:
Handle: RePEc:red:sed011:545

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References

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  1. Andrés Erosa & Ana Hidalgo Cabrillana, 2008. "On Finance As A Theory Of Tfp, Cross-Industry Productivity Differences, And Economic Rents," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 437-473, 05.
  2. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
  3. Joseph P. Kaboski & Robert M. Townsend, 2005. "Policies and Impact: An Analysis of Village-Level Microfinance Institutions," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 1-50, 03.
  4. Gine, Xavier & Townsend, Robert M., 2003. "Evaluation of financial liberalization : a general equilibrium model with constrained occupation choice," Policy Research Working Paper Series 3014, The World Bank.
  5. William M. Gentry & R. Glenn Hubbard, 2000. "Entrepreneurship and Household Saving," NBER Working Papers 7894, National Bureau of Economic Research, Inc.
  6. Xavier Giné & Dean Karlan, 2009. "Group versus Individual Liability: Long Term Evidence from Philippine Microcredit Lending Groups," Working Papers 970, Economic Growth Center, Yale University.
  7. Jain, Sanjay & Mansuri, Ghazala, 2003. "A little at a time: the use of regularly scheduled repayments in microfinance programs," Journal of Development Economics, Elsevier, vol. 72(1), pages 253-279, October.
  8. Paulson, Anna L. & Townsend, Robert, 2004. "Entrepreneurship and financial constraints in Thailand," Journal of Corporate Finance, Elsevier, vol. 10(2), pages 229-262, March.
  9. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
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Cited by:
  1. Oriana Bandiera & Robin Burgess & Narayan Das & Selim Gulesci & Imran Rasul & Munshi Sulaiman, 2013. "Can Basic Entrepreneurship Transform the Economic Lives of the Poor?," STICERD - Economic Organisation and Public Policy Discussion Papers Series 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Jaikishan Desai & Kristin Johnson & Alessandro Tarozzi, 2013. "On the Impact of Microcredit: Evidence from a Randomized Intervention in Rural Ethiopia," Working Papers 741, Barcelona Graduate School of Economics.
  3. Nguimkeu, Pierre, 2014. "A structural econometric analysis of the informal sector heterogeneity," Journal of Development Economics, Elsevier, vol. 107(C), pages 175-191.
  4. Renuka Sane & Susan Thomas, 2013. "The real cost of credit constraints: Evidence from micro-finance," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-013, Indira Gandhi Institute of Development Research, Mumbai, India.

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