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

39 Pages Posted: 26 Jun 2015

See all articles by Lori A. Beaman

Lori A. Beaman

Northwestern University - Department of Economics

Dean S. Karlan

Northwestern University - Kellogg School of Management; 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: September 15, 2014

Abstract

We partnered with a micro-lender in Mali to randomize credit offers at the village level. Then, in no-loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment. In loan-villages, we gave grants to a random subset of farmers who (endogenously) did not borrow. These farmers have lower – in fact zero – marginal returns to the grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal returns to investment self-select into lending programs.

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 (September 15, 2014). Center for Global Development Working Paper No. 377. Available at SSRN: https://ssrn.com/abstract=2622740 or http://dx.doi.org/10.2139/ssrn.2622740

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

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Yale University ( email )

Box 208269
New Haven, CT 06520-8269
United States

Innovations for Poverty Action ( email )

1731 Connecticut Ave, 4th floor
New Haven, CT 20009
United States

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

E60-246
77 Massachusetts Avenue
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 )

London
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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