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The Elasticity of Demand for MicrocreditGabriela SalazarCornell University Vicki L. BoganCornell University Calum G. TurveyCornell University - School of Applied Economics and Management July 20, 2010 Abstract: While most theoretical models assume the demand for microcredit is inelastic, the price elasticity of demand for microcredit is exceptionally relevant in designing appropriate microfinance institution (MFI) financial products and policy. Using a unique survey instrument, this paper extracts loan demand schedules and elasticities of MFI borrowers in the Dominican Republic. We find that client demand elasticities are not homogeneous and are correlated with certain borrower characteristics. Overall, results suggest that micro-entrepreneurs, who have already entered the MFI market, have close to unit elastic demand for microcredit.
Number of Pages in PDF File: 33 Keywords: Microcredit, Demand elasticity JEL Classification: G21, O16 working papers seriesDate posted: July 21, 2010 ; Last revised: August 31, 2011Suggested CitationContact Information
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