Roads and Loans
Review of Financial Studies, Forthcoming
54 Pages Posted: 16 Jul 2019 Last revised: 24 Mar 2023
Date Written: March 2023
Does financing respond to changes in productive opportunities, even for the world's poor? We answer this question by examining the response of private bank financing to an infrastructure program that brought road access to unconnected Indian villages. This program prioritized roads for villages above specific population thresholds, allowing us to exploit resulting discontinuities for identification. Using detailed data from a large bank, we find that 75% more villagers get loans, and the average amount lent to them is 30-35% higher, in villages just above these thresholds. District-level analyses further suggest that roads and loans are complements in the growth process.
Keywords: Finance and growth, Infrastructure, Roads, Rural lending
JEL Classification: G21, O16
Suggested Citation: Suggested Citation