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American Economic Review Vol. 104 No. 5 2014

The Aggregate Impact of Household Saving and Borrowing Constraints: Designing a Field Experiment in Uganda

Joseph P. Kaboski1; Molly Lipscomb2; Virgiliu Midrigan3

1 University of Notre Dame and NBER, 717 Flanner Hall, Notre Dame, IN 46556 (e-mail: ) · 2 University of Virginia, Garrett Hall, 235 McCormick Ave., Charlottesville, VA 22904 (e-mail: ) · 3 New York University and NBER, 19 W 4th St, New York, NY 10012 (e-mail: )

open access

Abstract

We develop a model of households with multiple needs (smoothing shocks, financing investment) and constraints (limited credit, self-control issues) in order to examine the nature of household's financing constraints in a developing country, and the impact of relaxing them. We show that increased access to credit has very different implications for the aggregate model economy depending on its form: asset-financed or cash. We then illustrate how a short-term increase in access to loans leads to very distinct behavior in the short run. The relevance of the model can be evaluated using a field experiment, which we are currently implementing in Uganda.

DOI
10.1257/aer.104.5.171
Volume
104
Issue
5
Pages
171-176
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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