A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative

Joseph Kaboski
Robert M. Townsend
Publication Type: 
Papers
Publication Article File: 
Journal Name: 
Econometrica
Journal Volume: 
79
Journal Number: 
5
Pages: 
1357-1406
Publication Year: 
2011

Winner, 2012 Frisch Medal in Econometrics. This paper uses a structural model to understand, predict, and evaluate the impact of an exogenous microcredit intervention program, the Thai Million Baht Village Fund program. We model household decisions in the face of borrowing constraints, income uncertainty, and high-yield indivisible investment opportunities. After estimation of parameters using pre-program data, we evaluate the model’s ability to predict and interpret the impact of the village fund intervention. Simulations from the model mirror the data in yielding a greater increase in consumption than credit, which is interpreted as evidence of credit constraints. A cost-benefit analysis using the model indicates that some households value the program much more than its per household cost, but overall the program costs 20 percent more than the sum of these benefits.

 

JEL Codes: 
O1, E2
Region: 
East Asia and the Pacific
Country: 
Thailand
Topic: 
Economic Modeling
Topic: 
Credit
Topic: 
Microfinance
Topic: 
Policy Evaluation
Topic: 
Consumption
Topic: 
Growth