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Full-Text Articles in Social and Behavioral Sciences
Do Risky Microfinance Borrowers Really Invest In Risky Projects? Experimental Evidence From Bolivia., Eliana Zeballos, Alessandra Cassar, Bruce Wydick
Do Risky Microfinance Borrowers Really Invest In Risky Projects? Experimental Evidence From Bolivia., Eliana Zeballos, Alessandra Cassar, Bruce Wydick
Economics
This paper reports the results of an experiment designed to test a fundamental assumption in Stiglitz and Weiss (1981) model of credit rationing, that defaulting borrowers are associated with investment in risky projects. Through an artefactual field experiment with 200 Bolivian microfinance borrowers, we observe that subjects from real-world delinquent borrowing groups do not prefer risky projects to safer ones significantly more than subjects from repaying groups. Moreover, when faced with the choice between two options framed as consumption or a relatively safe investment project, risky borrowers significantly opt more for consumption, supporting more recent behavioral theories of credit market …
Credit Rationing With Behavioral Foundations: Revisiting Stiglitz And Weiss, Alessandra Cassar, Bruce Wydick
Credit Rationing With Behavioral Foundations: Revisiting Stiglitz And Weiss, Alessandra Cassar, Bruce Wydick
Economics
The seminal credit market model of Stiglitz and Weiss (1981) proposes that asymmetric information between borrowers and lenders creates a moral hazard in which borrowers to have an incentive to invest in risky projects, creating the basis for a rationing equilibrium in credit markets. Other recent behavioral work, argues that a different type of behavior is more central to credit market risk: the temptation for borrowers to use borrowed capital to meet short-term consumption needs rather than for productive investment (Banerjee and Mullainathan, 2010). In this note, we present a simple model that is able to explain credit rationing where …
Social Networks, Neighborhood Effects, And Credit Access: Evidence From Rural Guatemala, Bruce Wydick, Harmony Karp Hayes, Sarah Hilliker Kempf
Social Networks, Neighborhood Effects, And Credit Access: Evidence From Rural Guatemala, Bruce Wydick, Harmony Karp Hayes, Sarah Hilliker Kempf
Economics
We measure the extent to which social networks determine sources of credit from a survey of 465 households in western Guatemala. We estimate correlated, contextual and endogenous effects of networks at the neighborhood, church, and village levels, finding that church networks display endogenous effects in credit access. We calculate an elasticity of social imitation (ESI) indicating if the percentage of people accessing microfinance in a church network doubles, the probability of an individual household accessing microfinance increases by 14.1 percent, a magnitude similar to our estimated ESIs for televisions and cell phones within church and neighbor networks.
Microfinance And Home Improvement: Using Retrospective Panel Data To Measure Program Effects On Fundamental Events, Craig Mcintosh, Gonzalo Villaran, Bruce Wydick
Microfinance And Home Improvement: Using Retrospective Panel Data To Measure Program Effects On Fundamental Events, Craig Mcintosh, Gonzalo Villaran, Bruce Wydick
Economics
Rigorously estimating the effects of development programs is notoriously difficult. In this paper we present a methodology that borrows from "event studies" commonly used in the finance literature to ascertain the impacts of corporate mergers. In our RETRAFECT methodology a retrospective panel data set is created based on “fundamental” events in the history of surveyed households, events that are discrete, unforgettable, and important to welfare. Based on the relationship between the changes in the estimated probabilities of these events and the timing of the introduction and uptake of a treatment, it is possible to ascertain if the probability of these …