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Roads and Loans

Author

Listed:
  • Sumit Agarwal
  • Abhiroop Mukherjee
  • S Lakshmi
  • Francesca Cornelli

Abstract

Does financing respond to changes in productive opportunities, even for the world’s poor? We answer this question by examining the response of private bank financing to an infrastructure program that brought road access to unconnected Indian villages. This program prioritized roads for villages above specific population thresholds, allowing us to exploit the resultant discontinuities for identification. Using detailed data from a large bank, we find that 75 more villagers get loans, and the average amount lent to them is 30–35 higher, in villages just above these thresholds. District-level analyses further suggest that roads and loans are complements in the growth process.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Sumit Agarwal & Abhiroop Mukherjee & S Lakshmi & Francesca Cornelli, 2023. "Roads and Loans," The Review of Financial Studies, Society for Financial Studies, vol. 36(4), pages 1508-1547.
    • Handle: RePEc:oup:rfinst:v:36:y:2023:i:4:p:1508-1547.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhac053
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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