Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines

Dean Karlan, Sendhil Mullainathan and Benjamin N. Roth

No 24272, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A debt trap occurs when someone takes on a high-interest rate loan and is barely able to pay back the interest, and thus perpetually finds themselves in debt (often by re-financing). Studying such practices is important for understanding financial decision-making of households in dire circumstances, and also for setting appropriate consumer protection policies. We conduct a simple experiment in three sites in which we paid off high-interest moneylender debt of individuals. Most borrowers returned to debt within six weeks. One to two years .after intervention, treatment individuals were borrowing at the same rate as control households.

JEL-codes: D12 D91 O12 (search for similar items in EconPapers)
Date: 2018-02
New Economics Papers: this item is included in nep-mfd and nep-sea
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Published as Dean Karlan & Sendhil Mullainathan & Benjamin N. Roth, 2019. "Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines," American Economic Review: Insights, vol 1(1), pages 27-42.

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Related works:
Journal Article: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2019)
Working Paper: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2018)
Working Paper: Debt Traps? Market Vendors and Moneylender Debt in India and the Philippines (2018)
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