Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico

Dean Karlan and Jonathan Zinman

No 150381, Center Discussion Papers from Yale University, Economic Growth Center

Abstract: The long-run price elasticity of demand for credit is a key parameter for intertemporal modeling, policy levers, and lending practice. We use randomized interest rates, offered across 80 regions by Mexico’s largest microlender, to identify a 29-month dollars-borrowed elasticity of -1.9. This elasticity increases from -1.1 in year one to -2.9 in year three. The number of borrowers is also elastic. Credit bureau data does not show evidence of crowd-out. Competitors do not respond by reducing rates, perhaps because Compartamos’ profits are unchanged. The results are consistent with multiple equilibria in loan pricing.

Keywords: Consumer/Household; Economics (search for similar items in EconPapers)
Pages: 52
Date: 2013-05
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Citations: View citations in EconPapers (7)

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https://ageconsearch.umn.edu/record/150381/files/cdp1024.pdf (application/pdf)

Related works:
Journal Article: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2019)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:yaleeg:150381

DOI: 10.22004/ag.econ.150381

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