IDEAS home Printed from https://ideas.repec.org/p/san/wpecon/1901.html
   My bibliography  Save this paper

Social groups and credit shocks: Evidence of inequalities in consumption smoothing

Author

Listed:
  • Vibhor Saxena

    () (School of Economics and Finance, University of St Andrews)

  • Ishaan Bindal

    () (National University of Singapore)

  • Philippe LeMay-Boucher

    () (Heriot-Watt University)

Abstract

A strand of research holds the view that restricting access to credit to regulate over-borrowing can worsen consumers’ financial condition. Another strand of research holds the view that access to credit in the developing countries with subprime credit markets is determined by social groupings and ethnic affiliations. By merging these two strands of research, we investigate the impact of Andhra Pradesh microfinance act (2010) on the consumption expenditure of marginalised social groups and the upper caste Hindu groups in India. We construct an aggregated district level panel data for eight quarters and estimate the impact of unanticipated policy change. The results of our analysis show that the sudden restriction of access to credit has larger impact on the consumption levels of the marginalised social groups: lower castes, tribes, and Muslims. The findings also confirm the failure of contingency policy enacted for smoothing consumption.

Suggested Citation

  • Vibhor Saxena & Ishaan Bindal & Philippe LeMay-Boucher, 2019. "Social groups and credit shocks: Evidence of inequalities in consumption smoothing," Discussion Paper Series, School of Economics and Finance 201901, School of Economics and Finance, University of St Andrews.
  • Handle: RePEc:san:wpecon:1901
    as

    Download full text from publisher

    File URL: http://www.st-andrews.ac.uk/~wwwecon/repecfiles/4/1901.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Sonalde Desai & Veena Kulkarni, 2008. "Changing educational inequalities in india in the context of affirmative action," Demography, Springer;Population Association of America (PAA), vol. 45(2), pages 245-270, May.
    2. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
    3. James J. Heckman & Hidehiko Ichimura & Petra E. Todd, 1997. "Matching As An Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 605-654.
    4. Sane Renuka & Thomas Susan, 2016. "The Real Cost of Credit Constraints: Evidence from Micro-finance," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 151-183, January.
    5. Asadullah, M. Niaz & Yalonetzky, Gaston, 2012. "Inequality of Educational Opportunity in India: Changes Over Time and Across States," World Development, Elsevier, vol. 40(6), pages 1151-1163.
    6. List, John A. & McHone, W. Warren & Millimet, Daniel L., 2004. "Effects of environmental regulation on foreign and domestic plant births: is there a home field advantage?," Journal of Urban Economics, Elsevier, vol. 56(2), pages 303-326, September.
    7. Prabirendra Chatterjee & Sudipta, Sarangi, "undated". "Social Identity and Group Lending," Working Papers UWEC-2005-06-R, University of Washington, Department of Economics.
    8. Zinman, Jonathan, 2010. "Restricting consumer credit access: Household survey evidence on effects around the Oregon rate cap," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 546-556, March.
    9. Kaivan Munshi & Mark Rosenzweig, 2016. "Networks and Misallocation: Insurance, Migration, and the Rural-Urban Wage Gap," American Economic Review, American Economic Association, vol. 106(1), pages 46-98, January.
    10. Morse, Adair, 2011. "Payday lenders: Heroes or villains?," Journal of Financial Economics, Elsevier, vol. 102(1), pages 28-44, October.
    11. Kaivan Munshi, 2014. "Community Networks and the Process of Development," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 49-76, Fall.
    12. Craig Johnson & Priya Deshingkar & Daniel Start, 2005. "Grounding the State: Devolution and Development in India's Panchayats," Journal of Development Studies, Taylor & Francis Journals, vol. 41(6), pages 937-970.
    13. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
    14. Scott Carrell & Jonathan Zinman, 2014. "In Harm's Way? Payday Loan Access and Military Personnel Performance," Review of Financial Studies, Society for Financial Studies, vol. 27(9), pages 2805-2840.
    15. Donald P. Morgan & Michael R. Strain, 2007. "Payday holiday: how households fare after payday credit bans," Staff Reports 309, Federal Reserve Bank of New York.
    16. Beck, Thorsten & Demirguc-Kunt, Asli, 2006. "Small and medium-size enterprises: Access to finance as a growth constraint," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 2931-2943, November.
    17. Maurizio Mazzocco & Shiv Saini, 2012. "Testing Efficient Risk Sharing with Heterogeneous Risk Preferences," American Economic Review, American Economic Association, vol. 102(1), pages 428-468, February.
    18. Brian T. Melzer, 2011. "The Real Costs of Credit Access: Evidence from the Payday Lending Market," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 517-555.
    19. Vibhor Saxena & P.C. Bhattacharya, 2015. "Inequalities in accessing LPG and electricity consumption in India: The role of caste, tribe, and religion," Discussion Paper Series, School of Economics and Finance 201512, School of Economics and Finance, University of St Andrews, revised 25 Jun 2017.
    20. Matthew Elliott & Arun Chandrasekhar & Attila Ambrus, 2015. "Social Investments, Informal Risk Sharing, and Inequality," 2015 Meeting Papers 189, Society for Economic Dynamics.
    21. David Cutler & Winnie Fung & Michael Kremer & Monica Singhal & Tom Vogl, 2010. "Early-Life Malaria Exposure and Adult Outcomes: Evidence from Malaria Eradication in India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 72-94, April.
    22. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," World Bank Economic Review, World Bank Group, vol. 4(3), pages 251-269, September.
    23. Victor Stango & Jonathan Zinman, 2009. "Exponential Growth Bias and Household Finance," Journal of Finance, American Finance Association, vol. 64(6), pages 2807-2849, December.
    24. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    25. Sriram M S, 2010. "Commercialisation of Microfinance in India: A Discussion on the Emperor’s Apparel," IIMA Working Papers WP2010-03-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    financial deleveraging; social insurance; consumption smoothing; microfinance; Andhra Pradesh;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G2 - Financial Economics - - Financial Institutions and Services
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:san:wpecon:1901. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The School of Economics and Finance). General contact details of provider: http://edirc.repec.org/data/destauk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.