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A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative

59 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: December 1, 2008

Abstract

This paper uses a structural model to understand, predict, and evaluate the impact of an exogenous micro credit intervention program, the Thai Million Baht Village Fund program. We model household decisions in the face of borrowing constraints, income uncertainty, and high-yield indivisible investment opportunities. After estimation of parameters using pre-program data, we evaluate the model’s ability to predict and interpret the impact of the village fund intervention. Simulated predictions from the model mirror actual data in reproducing a greater increase in consumption than credit, which is interpreted as evidence of credit constraints. A cost-benefit analysis using the model indicates that some households value the program much more than its per household cost, but overall the program costs 20 percent more than the sum of these benefits.

Keywords: microfinance, buffer stock, credit constraint

JEL Classification: O1, E2

Suggested Citation

Kaboski, Joseph P. and Townsend, Robert M., A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative (December 1, 2008). MIT Department of Economics Working Paper No. 09-12. Available at SSRN: https://ssrn.com/abstract=1395349 or http://dx.doi.org/10.2139/ssrn.1395349

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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