Distributional Aspects of Microcredit Expansions

Tobias Christiansen and Melvyn Weeks

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Various poverty reduction strategies are being implemented in the pursuit of eliminating extreme poverty. One such strategy is increased access to microcredit in poor areas around the world. Microcredit, typically defined as the supply of small loans to underserved entrepreneurs that originally aimed at displacing expensive local money-lenders, has been both praised and criticized as a development tool Banerjee et al. (2015c). This paper presents an analysis of heterogeneous impacts from increased access to microcredit using data from three randomised trials. In the spirit of recognising that in general the impact of a policy intervention varies conditional on an unknown set of factors, particular, we investigate whether heterogeneity presents itself as groups of winners and losers, and whether such subgroups share characteristics across RCTs. We find no evidence of impacts, neither average nor distributional, from increased access to microcredit on consumption levels. In contrast, the lack of average effects on profits seems to mask heterogeneous impacts. The findings are, however, not robust to the specific machine learning algorithm applied. Switching from the better performing Elastic Net to the worse performing Random Forest leads to a sharp increase in the variance of the estimates. In this context, methods to evaluate the relative performing machine learning algorithm developed by Chernozhukov et al. (2019) provide a disciplined way for the analyst to counter the uncertainty as to which algorithm to deploy.

Keywords: Machine learning methods; microcredit; development policy; treatment effects; random forest; elastic net (search for similar items in EconPapers)
JEL-codes: D14 G21 I38 O12 O16 P36 (search for similar items in EconPapers)
Date: 2020-11-03
New Economics Papers: this item is included in nep-big, nep-dev, nep-ent and nep-mfd
Note: tgc32, mw217
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:20100

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