Is It Who You Are or What You Get? Comparing the Impacts of Loans and Grants for Microenterprise Development

Bruno Crépon, Mohamed El-Komi and Adam Osman

American Economic Journal: Applied Economics, 2024, vol. 16, issue 1, 286-313

Abstract: Is the type of financial support provided to businesses more important than which businesses receive it? Loans and grants can lead to differences in optimal investments and in scope for moral hazard. We randomize 3,293 business loan applicants into receiving a loan, cash grant, in-kind grant, or nothing. All treatments equally increase income, yet there are large differences within a treatment group with impacts concentrated at the top of the distribution. Those who succeed with loans are observationally equivalent to those who succeed with grants, showcasing that owner heterogeneity is more important than the type of support received in microenterprise development.

JEL-codes: D22 D82 G32 H81 J16 M13 O16 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/app.20210683

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