Microcredit and willingness to pay for environmental quality: Evidence from a randomized-controlled trial of finance for sanitation in rural Cambodia
Ariel Ben Yishay,
Neil Buddy Shah,
Stuart Shirrell and
Journal of Environmental Economics and Management, 2017, vol. 86, issue C, 121-140
Low willingness to pay (WTP) for environmental quality in developing countries is a key research question in environmental economics. One explanation is that missing credit markets may suppress WTP for environmental improvements that require large up-front investments. We test the impact of microloans on WTP for hygienic latrines via a randomized controlled trial in 30 villages in rural Cambodia. We find that microcredit dramatically raises WTP for improved latrines, with 60% of households in the Financing arm willing to purchase at an unsubsidized price, relative to 25% in the Non-financing arm. Effects on latrine installation are positive but muted by several factors, including a negative peer effect: randomly induced purchases by neighbors reduce a household's probability of installing its own latrine. On methodological grounds, this paper shows that a “decision-focused evaluation” can be integrated into academic analysis to provide insight into questions of general interest.
Keywords: Sanitation; Microcredit; Becker-DeGroot-Marschak; Randomization inference; Decision-focused evaluation (search for similar items in EconPapers)
JEL-codes: Q16 Q51 Q53 Q56 C12 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:86:y:2017:i:c:p:121-140
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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates
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