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The Impacts of Credit on Village Economies

46 Pages Posted: 30 Apr 2009  

Joseph P. Kaboski

Ohio State University (OSU) - Economics; National Bureau of Economic Research (NBER); University of Notre Dame - Department of Economics

Robert M. Townsend

MIT - Department of Economics

Date Written: April 9, 2009

Abstract

This paper evaluates the short-term impact of Thailand's 'Million Baht Village Fund' program, among the largest scale government microfinance initiatives in the world, using pre-and post-program panel data and quasi-experimental cross-village variation in credit-per-household. We find that the village funds have increased total short-term credit, consumption, agricultural investment, income growth (from business and labor), but decreased overall asset growth. We also find a positive impact on wages, an important general equilibrium effect. The findings are broadly consistent qualitatively with models of credit-constrained household behavior and models of intermediation and growth.

Keywords: microfinance, finance and growth, credit constraints

JEL Classification: O1, E2

Suggested Citation

Kaboski, Joseph P. and Townsend, Robert M., The Impacts of Credit on Village Economies (April 9, 2009). MIT Department of Economics Working Paper No. 09-13. Available at SSRN: https://ssrn.com/abstract=1395348 or http://dx.doi.org/10.2139/ssrn.1395348

Joseph P. Kaboski

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Notre Dame - Department of Economics ( email )

Notre Dame, IN 46556
United States

Robert M. Townsend (Contact Author)

MIT - Department of Economics ( email )

Bldg. E52-252c
50 Memorial Drive
Cambridge, MA 02142
United States
617-452-3722 (Phone)
617-253-1330 (Fax)

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