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

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.


Issue Date:
2014-05
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/183318
Total Pages:
46
JEL Codes:
D21; D92; O12; O16; Q12; Q14
Note:
Revised version of this paper posted Sept. 1, 2015
Series Statement:
Economic Growth Center Discussion Paper
1042




 Record created 2017-04-01, last modified 2017-05-27

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