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

Dean Karlan and Jonathan Zinman

No 19106, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E43 G21 O11 O12 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-dev, nep-exp, nep-mac and nep-mfd
Note: CF LE LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Dean Karlan & Jonathan Zinman, 2019. "Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico," The Review of Economic Studies, vol 86(4), pages 1704-1746.

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Related works:
Journal Article: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2019) Downloads
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013) Downloads
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013) Downloads
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013) Downloads
Working Paper: Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico (2013) Downloads
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