NBER Working Papers and Publications
|February 2018||Measuring the Equilibrium Impacts of Credit: Evidence from the Indian Microfinance Crisis|
with Emily Breza: w24329
In October 2010, the state government of Andhra Pradesh, India issued an emergency ordinance, bringing microfinance activities in the state to a complete halt and causing a nation-wide shock to the liquidity of lenders, especially those with loans in the affected state. We use this massive dislocation in the microfinance market to identify the causal impacts of a reduction in credit supply on consumption, earnings, and employment in general equilibrium. Using a proprietary, hand-collected district-level data set from 25 separate, for-profit microlenders matched with household data from the National Sample Survey, we find that district-level reductions in credit supply are associated with significant decreases in casual daily wages, household wage earnings and consumption. We also find that...
|July 2015||Relaxing Migration Constraints for Rural Households|
with Shing-Yi Wang, Yongxiang Wang: w21314
This paper exploits two unique features of China's history to study the effects of access to internal migration: reforms to the household registration (hukou) system, and historical migration flows. We show that temporary migration due to a government policy called the “sent-down youth” (SDY) program created lasting inter-province links, so that decades later, hukou reforms in cities which sent SDY increased migration in provinces where those SDY temporarily resided. Using this variation, we find that improved access to migration leads to higher consumption levels and lower consumption volatility for rural households. Furthermore, household production shifts into high-risk, high-return activities.
|June 2014||Social Networks as Contract Enforcement: Evidence from a Lab Experiment in the Field|
with Arun G. Chandrasekhar, Horacio Larreguy: w20259
Absence of well-functioning formal institutions leads to reliance on social networks to enforce informal contracts. Social ties may aid cooperation, but agents vary in network centrality, and this hierarchy may hinder cooperation. To assess the extent to which networks substitute for enforcement, we conducted high-stakes games across 34 Indian villages. We randomized subjects' partners and whether contracts were enforced to estimate how partners' relative network position differentially matters across contracting environments. Socially close pairs cooperate even without enforcement; distant pairs do not. Pairs with unequal importance behave less cooperatively without enforcement. Thus capacity for cooperation depends on the underlying network.
|May 2013||The Miracle of Microfinance? Evidence from a Randomized Evaluation|
with Esther Duflo, Abhijit Banerjee, Rachel Glennerster: w18950
This paper reports on the first randomized evaluation of the impact of introducing the standard microcredit group-based lending product in a new market. In 2005, half of 104 slums in Hyderabad, India were randomly selected for opening of a branch of a particular microfinance institution (Spandana) while the remainder were not, although other MFIs were free to enter those slums. Fifteen to 18 months after Spandana began lending in treated areas, households were 8.8 percentage points more likely to have a microcredit loan. They were no more likely to start any new business, although they were more likely to start several at once, and they invested more in their existing businesses. There was no effect on average monthly expenditure per capita. Expenditure on durable goods increased in trea...
Published: Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. 2015. "The Miracle of Microfinance? Evidence from a Randomized Evaluation." American Economic Journal: Applied Economics, 7(1): 22-53. citation courtesy of