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

46 Pages Posted: 25 Aug 2014

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 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 Thuysbaert, Bram and Udry, Christopher, Self-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 )

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Evanston, IL 60208
United States

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

Dean S. Karlan

Yale University ( email )

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New Haven, CT 06520-8269
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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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United States

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR) ( email )

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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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