Selection into Credit Markets: Evidence from Agriculture in Mali

66 Pages Posted: 25 Aug 2014 Last revised: 17 Mar 2023

See all articles by Lori A. Beaman

Lori A. Beaman

Northwestern University - Department of Economics

Dean S. Karlan

Yale University; Northwestern University - Kellogg School of Management; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Bram Thuysbaert

University of Ghent; Innovations for Poverty Action

Christopher Udry

Northwestern University

Date Written: August 2014

Abstract

We examine whether returns to capital are higher for farmers who borrow than for those who do not, a direct implication of many credit market models. We measure the difference in returns through a two-stage loan and grant experiment. We find large positive investment responses and returns to grants for a random (representative) sample of farmers, showing that liquidity constraints bind. However, we find zero returns to grants for a sample of farmers who endogenously did not borrow. Thus we find important heterogeneity, even conditional on a wide range of observed characteristics, which has critical implications for theory and policy.

Suggested Citation

Beaman, Lori A. and Karlan, Dean S. and Karlan, Dean S. and Thuysbaert, Bram and Udry, Christopher, Selection into Credit Markets: Evidence from Agriculture in Mali (August 2014). NBER Working Paper No. w20387, Available at SSRN: https://ssrn.com/abstract=2486337

Lori A. Beaman (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States

HOME PAGE: http://faculty.wcas.northwestern.edu/~lab823/

Dean S. Karlan

Yale University ( email )

Box 208269
New Haven, CT 06520-8269
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Innovations for Poverty Action ( email )

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United States

Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

E60-246
77 Massachusetts Avenue
Cambridge, MA 02139
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

Bram Thuysbaert

University of Ghent ( email )

Hoveniersberg 24
Gent, 9000
Belgium

Innovations for Poverty Action ( email )

1731 Connecticut Ave, 4th floor
New Haven, CT 20009
United States

Christopher Udry

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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