The impact of credit on income poverty in urban Mexico
AbstractIn recent years, an important number of impact studies have attempted to examine the effect of credit on income poverty; however, many of these studies have not paid sufficient attention to the problems of endogeneity and selection bias. The few exceptional cases have employed econometric techniques that work at the village level. The problem is that the concept of village is inappropriate in the urban context where a large percentage of microfinance organisations in the developing world actually operate. This paper presents an econometric approach which controls for endogeneity and self-selection using data from a quasi-experiment designed at the household level, and conducted in three urban settlements in the surroundings of the Metropolitan area of Mexico City. The paper provides an estimation of the impact of credit, employing different equivalence scales in order to measure the sensitivity of the poverty impact to the intra-household distribution of welfare. We find a link between poverty impacts and lending technology. Group-based lending programmes are more effective in reducing the poverty gap but in doing so, they achieve insignificant impacts on the poverty incidence. By contrast, individual lending programmes reported significant and small impacts at the upper limits of deprivation but insignificant impacts on the poverty gap.
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Bibliographic InfoPaper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2007005.
Length: 43 pages
Date of creation: Mar 2007
Date of revision: Mar 2007
endogeneity; selection bias; microfinance; credit; income poverty; impact analysis; Mexico;
Find related papers by JEL classification:
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-14 (All new papers)
- NEP-MFD-2007-04-14 (Microfinance)
- NEP-URE-2007-04-14 (Urban & Real Estate Economics)
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.:
- Coleman, Brett E., 1999. "The impact of group lending in Northeast Thailand," Journal of Development Economics, Elsevier, vol. 60(1), pages 105-141, October.
- Greene, William H, 1981. "On the Asymptotic Bias of the Ordinary Least Squares Estimator of the Tobit Model," Econometrica, Econometric Society, vol. 49(2), pages 505-13, March.
- Li, Xia & Gan, Christopher & Hu, Baiding, 2011. "The welfare impact of microcredit on rural households in China," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 404-411, August.
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