214 research outputs found
Market structure and borrower welfare in microfinance
Motivated by recent controversies surrounding the role of commercial lenders
in microfinance, we analyze borrower welfare under different market structures,
considering a benevolent non-profit lender, a for-profit monopolist, and
a competitive credit market. To understand the magnitude of the effects analyzed,
we simulate the model with parameters estimated from the MIX Market
database. Our results suggest that market power can have severe implications
for borrower welfare, while despite possible information frictions competition
typically delivers similar borrower welfare to non-profit lending. In addition,
for-profit lenders are less likely to use joint liability than non-profits
Your loss is my gain: a recruitment experiment with framed incentives
Empirically, labor contracts that financially penalize failure induce higher effort provision than economically identical contracts presented as paying a bonus for success, an effect attributed to loss aversion. This is puzzling, as penalties are infrequently used in practice. The most obvious explanation is selection: loss averse agents are unwilling to accept such contracts. I formalize this intuition, then run an experiment to test it. Surprisingly, I find that workers were 25 percent more likely to accept penalty contracts, with no evidence of adverse or advantageous selection. Consistent with the existing literature, penalty contracts also increased performance on the job by 0.2 standard deviations. I outline extensions to the basic theory that are consistent with the main results, but argue that more research is needed on the long-term effects of penalty contracts if we want to understand why firms seem unwilling to use them
Commercialization and the decline of joint liability microcredit
Numerous authors point to a decline in joint liability microcredit, and rise in individual liability lending. But empirical evidence is lacking, and there have been no rigorous analyses of possible causes. We first show using the well-known MIX Market dataset that there is evidence for a decline. Second, we show theoretically that commercialization–an increase in competition and a shift from non-profit to for-profit lending (both of which are present in the data)–drives lenders to reduce their use of joint liability loan contracts. Third, we test the model's key predictions, and find support for them in the data
Essays on contract design in behavioral and development economics
This thesis consists of three chapters that fall under the broad banner of contract theory, applied to topics in behavioral and development economics. Empirically, labor contracts that financially penalize failure induce higher effort provision than economically identical contracts presented as paying a bonus for success. This is puzzling, as penalties are infrequently used in practice. The most obvious explanation is selection: loss averse agents are unwilling to accept such contracts. In the first chapter, I formalize and experimentally test this intuition. Surprisingly, I find that workers were 25 percent more likely to accept penalty contracts, with no evidence of adverse selection. Penalty contracts also increased performance on the job by 0.2 standard deviations. Finally, I outline extensions to the basic theory that are consistent with the main results.
The second chapter analyzes the effect of market structure in microfinance on borrower welfare and the types of contracts used. We find that market power can
have severe implications for borrower welfare, while despite information frictions, competition delivers similar borrower welfare to non-profit lending. We also find that for-profit lenders are less likely to use joint liability than non-profits, which is consistent with some empirical stylized facts suggesting a decline in use of joint liability. We simulate the model to evaluate quantitatively the importance of market structure for borrower welfare.
The third chapter contrasts individual liability lending with and without groups to joint liability lending, motivated by an apparent shift away from joint liability
lending. We show under what conditions individual liability can deliver welfare improvements over joint liability, conditions that depend on the joint income distribution and social capital. We then show that lower transaction costs that mechanically favor group lending may also encourage the creation of social capital. Finally, we again simulate the model to quantify our welfare conclusions
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Measuring and bounding experimenter demand
We propose a technique for assessing robustness to demand effects of findings from experiments and surveys. The core idea is that by deliberately inducing demand in a structured way we can bound its influence. We present a model in which participants respond to their beliefs about the researcher's objectives. Bounds are obtained by manipulating those beliefs with "demand treatments." We apply the method to 11 classic tasks, and estimate bounds averaging 0.13 standard deviations, suggesting that typical demand effects are probably modest. We also show how to compute demand-robust treatment effects and how to structurally estimate the model
Sharing once hidden information: credit bureaus, MFIs, and client welfare
For at least 30 years, the microfinance movement sought to provide credit in settings where strong constraints meant traditional banking methods weren’t feasible
Is the credit worth it? For-profit lenders in microfinance with rational and behavioral borrowers
The bulk of the literature on microcredit has focused on either not‐for‐profit lenders or assumes a perfectly competitive, zero‐profit market equilibrium. Yet the market has experienced a significant shift toward for‐profit lending and the assumptions of perfect competition are likely to be too strong in many locations. We review the state of the literature on for‐profit lending in microcredit, consider its implications for both conventionally ‘rational’ borrowers and for borrowers with behavioral biases, and point out directions for future research
Russkij sever, Problemy etnokul\u27turnoj istorii, etnografii, fol \u27kloristiki, Otvetstvennye redaktory T. A. Bernstam, K. V. Čistov, Nauka, Leningrad 1986, 219 str.
This paper contrasts individual liability lending with and without groups to joint liability lending. We are motivated by an apparent shift away from the use of joint liability by microfinance institutions, combined with recent evidence that a) converting joint liability groups to individual liability groups did not affect repayment rates, and b) an intervention that increased social capital in individual liability borrowing groups led to improved repayment performance. First, we show that individual lending with or without groups may constitute a welfare improvement over joint liability, so long as borrowers have sufficient social capital to sustain mutual insurance. Second, we explore how the lender's lower transaction costs in group lending can encourage insurance by reducing the amount borrowers have to pay to bail one another out. Third, we discuss how group meetings might encourage insurance, either by increasing the incentive to invest in social capital, or because the time spent in meetings can facilitate setting up insurance arrangements. Finally, we perform a simple simulation exercise, evaluating quantitatively the welfare impacts of alternative forms of lending and how they relate to social capital
Bonus versus penalty: how robust are the effects of contract framing?
We study the relative effectiveness of contracts that are framed either in terms of bonuses or penalties. In one set of treatments subjects know at the time of effort provision whether they have achieved the bonus / avoided the penalty. In another set of treatments subjects only learn the success of their performance at the end of the task. We fail to observe a contract framing effect in either condition: effort provision is statistically indistinguishable under bonus and penalty contracts
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