Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines
A debt trap occurs when someone takes on a high-interest rate loan and is barely able to pay back the interest, and thus perpetually finds themselves in debt (often by re-financing). Studying such practices is important for understanding financial decision-making of households in dire circumstances, and also for setting appropriate consumer protection policies. We conduct a simple experiment in three sites in which we paid off high-interest moneylender debt of individuals. Most borrowers returned to debt within six weeks. One to two years .after intervention, treatment individuals were borrowing at the same rate as control households.
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Copy CitationDean Karlan, Sendhil Mullainathan, and Benjamin N. Roth, "Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines," NBER Working Paper 24272 (2018), https://doi.org/10.3386/w24272.
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Published Versions
Dean Karlan & Sendhil Mullainathan & Benjamin N. Roth, 2019. "Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines," American Economic Review: Insights, vol 1(1), pages 27-42. citation courtesy of 
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