Self‐Selection into Credit Markets: Evidence from Agriculture in Mali
46 Pages Posted: 5 Aug 2014 Last revised: 27 Aug 2015
Date Written: August 2015
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: Suggested Citation