Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico-Working Paper 331

Dean Karlan ()
Authors registered in the RePEc Author Service: Jonathan Zinman and Dean Karlan

No 331, Working Papers from Center for Global Development

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: credit; microcredit (search for similar items in EconPapers)
JEL-codes: E51 G21 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2013-07
New Economics Papers: this item is included in nep-exp, nep-mac and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:cgd:wpaper:331

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