Working Paper: CEPR ID: DP10103
Authors: Lori Beaman; Dean S. Karlan; Bram Thuysbaert; Christopher Udry
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: agriculture; credit markets; returns to capital
JEL Codes: D21; D92; O12; O16; Q12; Q14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cash grants in noloan villages (H81) | significant increases in agricultural investments (Q14) |
| cash grants in noloan villages (H81) | significant increases in profits (D33) |
| liquidity constraints (E41) | agricultural investments (Q14) |
| self-selection into borrowing (G51) | higher marginal returns (D29) |
| differential impact of cash grants in loan vs noloan villages (H81) | selection effect (C24) |
| lending process (G21) | positive self-selection (D91) |
| cash grants (H81) | increases in land cultivated (Q15) |
| cash grants (H81) | increases in fertilizer use (Q16) |
| cash grants (H81) | increases in overall input expenditures (E20) |
| not borrowing (G51) | zero marginal returns to grants (D69) |
| lending process (G21) | sorting of farmers into productivity categories (Q12) |