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American Economic Review Vol. 102 No. 2 2012

Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India

Michal Bauer1; Julie Chytilová2; Jonathan Morduch3

1 Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Opletalova 26, Prague, 11000, Czech Republic, and CERGE-EI—joint workplace of the Center for Economic Research and Graduate Education, Charles University in Prague, and the Economics Institute of the Academy of · 2 Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Opletalova 26, Prague, 11000, Czech Republic. · 3 Wagner Graduate School of Public Service, New York University, The Puck Building, 295 Lafayette Street, New York, NY 10012.

Abstract

We use experimental measures of time discounting and risk aversion for villagers in south India to highlight behavioral features of microcredit, a financial tool designed to reduce poverty and fix credit market imperfections. The evidence suggests that microcredit contracts may do more than reduce moral hazard and adverse selection by imposing new forms of discipline on borrowers. We find that, conditional on borrowing from any source, women with present-biased preferences are more likely than others to borrow through microcredit institutions. Another particular contribution of microcredit may thus be to provide helpful structure for borrowers seeking self-discipline. JEL: G21, I38, O15, O16, O18

DOI
10.1257/aer.102.2.1118
Volume
102
Issue
2
Pages
1118-1139
Language
en
Sources
crossref openalex bibtex:phds-export.bib

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