nep-mfd New Economics Papers
on Microfinance
Issue of 2007‒08‒14
two papers chosen by
Olivier Dagnelie
University of Namur

  1. Microfinance Games By Xavier Gine; Pamela Jakiela; Dean Karlan; Jonathan Morduch
  2. Are cash transfers made to women spent like other sources of income? By Schady, Norbert; Rosero, Jose

  1. By: Xavier Gine (World Bank); Pamela Jakiela (University of California, Berkeley); Dean Karlan (Yale University); Jonathan Morduch (New York University)
    Abstract: Microfinance has been heralded as an effective way to address imperfections in credit markets. From a theoretical perspective, however, the success of microfinance contracts has puzzling elements. In particular, the group-based mechanisms often employed are vulnerable to free-riding and collusion, although they can also reduce moral hazard and improve selection. We created an experimental economics laboratory in a large urban market in Lima, Peru and over seven months conducted eleven different games that allow us to unpack microfinance mechanisms in a systematic way. We find that risk-taking broadly conforms to predicted patterns, but that behavior is safer than optimal. The results help to explain why pioneering microfinance institutions have been moving away from group-based contracts. The work also provides an example of how to use framed field experiments as a methodological bridge between laboratory and field experiments.
    Keywords: microfinance, group lending, information asymmetries, contract theory, experimental economics
    JEL: O12 D92 D10 D21 D82 C93
    Date: 2006–09
  2. By: Schady, Norbert; Rosero, Jose
    Abstract: How cash transfers made to women are used has important implications for models of household behavior and for the design of social programs. In this paper, the authors use the randomized introduction of an unconditional cash transfer to poor women in rural Ecuador to analyze the effect of transfers on the food Engel curve. There are two main findings. First, the authors show that households randomly assigned to receive Bono de Desarrollo Humano (BDH) transfers have a significantly higher food share in expenditures than those that were randomly assigned to the control group. Second, they show that the rising food share among BDH beneficiaries is found among households that have both adult males and females, but not among households that only have adult females. Bargaining power between men and women is likely to be important in mixed-adult households, but not among female-only households, where there are no men to bargain with. Finally, the authors show that within mixed-adult households, program effects are only significant in households in which the initial bargaining capacity of women was likely to be weak. This pattern of results is consistent with an increase in the bargaining power of women in households that received BDH transfers.
    Keywords: Rural Poverty Reduction,Small Area Estimation Poverty Mapping,Poverty Lines,Anthropology,Municipal Housing and Land
    Date: 2007–07–01

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