The impact of informal credit on household welfare: evidence from rural Ethiopia

Habitamu Asifawu Tonch and Wook Sohn

Applied Economics Letters, 2022, vol. 29, issue 1, 12-16

Abstract: This study focuses on a credit-related informal risk-sharing mechanism and analyzes the effect of informal credit on household welfare. We use two-stage least squares regression to avoid the endogeneity problem and the Heckman correction procedure to remove possible self-selection bias. We find that informal credit is positively associated with welfare; each thousand Ethiopian Birr (approximately US$ 28) received in the form of informal credit improves the welfare expenditure of a household by approximately 4.3%.

Date: 2022
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DOI: 10.1080/13504851.2020.1854662

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