IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpdc/0403005.html
   My bibliography  Save this paper

Consumption Smoothing in Micro Credit Programs

Author

Listed:
  • Nidhiya Menon

    (Brandeis University)

Abstract

This paper studies the benefits of participation in micro credit programs, and examines whether membership in these programs is an effective instrument in smoothing inter-seasonal consumption. We hypothesize that the benefits to participation accrue differentially over time, as more experienced participants are better equipped on their own to minimize per capita consumption fluctuations. Using an Euler equation approach, we show that consumption differentials across seasons are inversely related to length of membership. Estimates from the gender-stratified model suggest that for a female participant, one year of membership reduces the percentage change in per capita consumption, caused by a unit shock, by 6%. We present simulation results confirming that as length of membership increases, the 'certainty equivalent' of the participant decreases.

Suggested Citation

  • Nidhiya Menon, 2004. "Consumption Smoothing in Micro Credit Programs," Development and Comp Systems 0403005, EconWPA.
  • Handle: RePEc:wpa:wuwpdc:0403005
    Note: Type of Document - pdf; pages: 35. 35 pages, pdf document
    as

    Download full text from publisher

    File URL: http://econwpa.repec.org/eps/dev/papers/0403/0403005.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dean Karlan & Jonathan Zinman, 2009. "Observing Unobservables: Identifying Information Asymmetries With a Consumer Credit Field Experiment," Econometrica, Econometric Society, vol. 77(6), pages 1993-2008, November.
    2. Dean Karlan & Jonathan Zinman, 2010. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 433-464, January.
    3. Dean S. Karlan & Jonathan Zinman, 2008. "Credit Elasticities in Less-Developed Economies: Implications for Microfinance," American Economic Review, American Economic Association, vol. 98(3), pages 1040-1068, June.
    4. Xavier Giné & Pamela Jakiela & Dean Karlan & Jonathan Morduch, 2010. "Microfinance Games," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 60-95, July.
    5. 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.
    6. Vittoria Cerasi & Lucia Dalla Pellegrina, 2009. "Solidarity Behind Microfinance," Working Papers 20091101, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica.

    More about this item

    Keywords

    Consumption smoothing; Micro credit; Euler equation;

    JEL classification:

    • O - Economic Development, Innovation, Technological Change, and Growth
    • P - Economic Systems

    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:wpa:wuwpdc:0403005. 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: (EconWPA). General contact details of provider: http://econwpa.repec.org .

    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.

    We have no references for this item. You can help adding them by using 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.