Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines

Dean Karlan, Sendhil Mullainathan and Benjamin N. Roth

American Economic Review: Insights, 2019, vol. 1, issue 1, 27-42

Abstract: A debt trap occurs when someone takes on a high-interest-rate loan and is barely able to pay back the interest, and thus perpetually finds themselves in debt (often by refinancing). Studying such practices is important for understanding financial decision-making of households in dire circumstances, and also for setting appropriate consumer protection policies. We conduct a simple experiment in three sites in which we paid off high-interest moneylender debt of individuals. Most borrowers returned to debt within six weeks. One to two years after intervention, treatment individuals were borrowing at the same rate as control households.

JEL-codes: D14 D18 D91 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aeri.20180030
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Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2018)
Working Paper: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2018)
Working Paper: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2018)
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