Self‐Selection into Credit Markets: Evidence from Agriculture in Mali

46 Pages Posted: 5 Aug 2014 Last revised: 27 Aug 2015

See all articles by Lori A. Beaman

Lori A. Beaman

Northwestern University - Department of Economics

Dean S. Karlan

Yale University; 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 2015

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.

Keywords: credit markets, agriculture, returns to capital

JEL Classification: D21, D92, O12, O16, Q12, Q14

Suggested Citation

Beaman, Lori A. and Karlan, Dean S. and Thuysbaert, Bram and Udry, Christopher, Self‐Selection into Credit Markets: Evidence from Agriculture in Mali (August 2015). Yale University Economic Growth Center Discussion Paper No. 1042; Yale Economics Department Working Paper No. 135. Available at SSRN: https://ssrn.com/abstract=2475089 or http://dx.doi.org/10.2139/ssrn.2475089

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

Innovations for Poverty Action ( email )

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

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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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