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

Listed author(s):
  • Lori Beaman
  • Dean Karlan
  • Bram Thuysbaert
  • Christopher Udry

We examine whether returns to capital are higher for farmers who borrow than for those who do not, a direct implication of many credit market models. We measure the difference in returns through a two-stage loan and grant experiment. We find large positive investment responses and returns to grants for a random (representative) sample of farmers, showing that liquidity constraints bind. However, we find zero returns to grants for a sample of farmers who endogenously did not borrow. Thus we find important heterogeneity, even conditional on a wide range of observed characteristics, which has critical implications for theory and policy.

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File URL: http://www.nber.org/papers/w20387.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 20387.

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Date of creation: Aug 2014
Handle: RePEc:nbr:nberwo:20387
Note: DEV LE LS
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  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, 01.
  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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