Roads and Loans

Sumit Agarwal (), Abhiroop Mukherjee () and S Lakshmi Naaraayanan ()
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Sumit Agarwal: National University of Singapore
Abhiroop Mukherjee: Institute for Emerging Market Studies, Hong Kong University of Science and Technology
S Lakshmi Naaraayanan: Ph.D in Finance, Hong Kong University of Science and Technology

No 2019-61, HKUST IEMS Working Paper Series from HKUST Institute for Emerging Market Studies

Abstract: Does financing respond to changes in productive opportunities even for the world's poor? We shed light by examining the response of private bank financing to a rural road-building program in India. The program prioritized roads for villages above explicit population thresholds, allowing us to use discontinuities in treatment probability for identification. We find large financing responses - odds of a villager getting a loan is twice as high, and the average loan amounts are about 50% higher - for villages just above the threshold compared to those below. Benefits seem to flow disproportionately to those traditionally disadvantaged in rural societies.

Pages: 69 pages
Date: 2019-05, Revised 2019-05
New Economics Papers: this item is included in nep-dev, nep-sea and nep-tre
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