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Self-Selection into Credit Markets: Evidence from Agriculture in Mali

Author

Listed:
  • Lori Beaman

    () (Northwestern University)

  • Dean Karlan

    () (Economic Growth Center, Yale University)

  • Bram Thuysbaert

    () (Ghent University)

  • Christopher Udry

    () (Economic Growth Center, Yale University)

Abstract

We partnered with a micro-lender in Mali to randomize credit offers at the village level. Then, in no-loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment. In loan-villages, we gave grants to a random subset of farmers who (endogenously) did not borrow. These farmers have lower – in fact zero – marginal returns to the grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal returns to investment self-select into lending programs.

Suggested Citation

  • Lori Beaman & Dean Karlan & Bram Thuysbaert & Christopher Udry, 2014. "Self-Selection into Credit Markets: Evidence from Agriculture in Mali," Working Papers 1042, Economic Growth Center, Yale University.
  • Handle: RePEc:egc:wpaper:1042
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    File URL: http://www.econ.yale.edu/growth_pdf/cdp1042.pdf
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    References listed on IDEAS

    as
    1. Lori Beaman & Dean Karlan & Bram Thuysbaert & Christopher Udry, 2013. "Profitability of Fertilizer: Experimental Evidence from Female Rice Farmers in Mali," American Economic Review, American Economic Association, vol. 103(3), pages 381-386, May.
    2. Tavneet Suri, 2011. "Selection and Comparative Advantage in Technology Adoption," Econometrica, Econometric Society, vol. 79(1), pages 159-209, January.
    3. Jessica Cohen & Pascaline Dupas & Simone Schaner, 2015. "Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial," American Economic Review, American Economic Association, vol. 105(2), pages 609-645, February.
    4. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 423-423.
    5. Orazio Attanasio & Britta Augsburg & Ralph De Haas & Emla Fitzsimons & Heike Harmgart, 2011. "Group lending or individual lending? Evidence from a randomised field experiment in Mongolia," IFS Working Papers W11/20, Institute for Fiscal Studies.
    6. Augsburg, Britta & de Haas, Ralph & Harmgart, Heike & Meghir, Costas, 2014. "Microfinance at the margin: Experimental evidence from Bosnia and Herzegovina," Discussion Papers, Research Unit: Economics of Change SP II 2014-304, Social Science Research Center Berlin (WZB).
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    Citations

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    Cited by:

    1. Inna Cintina & Inessa Love, 2014. "The Miracle of Microfinance Revisited: Evidence from Propensity Score Matching," Working Papers 2014-14, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    2. Karlan, Dean & Knight, Ryan & Udry, Christopher, 2015. "Consulting and capital experiments with microenterprise tailors in Ghana," Journal of Economic Behavior & Organization, Elsevier, vol. 118(C), pages 281-302.
    3. B. Kelsey Jack & Paulina Oliva & Christopher Severen & Elizabeth Walker & Samuel Bell, 2015. "Technology Adoption Under Uncertainty: Take-Up and Subsequent Investment in Zambia," NBER Working Papers 21414, National Bureau of Economic Research, Inc.
    4. Günther Fink & B. Kelsey Jack & Felix Masiye, 2018. "Seasonal Liquidity, Rural Labor Markets and Agricultural Production," NBER Working Papers 24564, National Bureau of Economic Research, Inc.
    5. repec:eee:wdevel:v:105:y:2018:i:c:p:189-200 is not listed on IDEAS
    6. Diego A.Vera-Cossio, 2017. "Targeting Credit through Community Members," PIER Discussion Papers 78, Puey Ungphakorn Institute for Economic Research, revised Dec 2017.
    7. Marshall Burke & Lauren Falcao Bergquist & Edward Miguel, 2018. "Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets," NBER Working Papers 24476, National Bureau of Economic Research, Inc.
    8. Inna Cintina & Inessa Love, 2014. "The Miracle of Microfinance Revisited: Evidence from Propensity Score Matching," Working Papers 201424, University of Hawaii at Manoa, Department of Economics.
    9. Nittai K. Bergman & Rajkamal Iyer & Richard T. Thakor, 2015. "Financial Accelerator at Work: Evidence from Corn Fields," NBER Working Papers 21086, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    credit markets; agriculture; returns to capital;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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