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Roads and Loans

Author

Listed:
  • Sumit Agarwal

    (National University of Singapore)

  • Abhiroop Mukherjee

    (Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

  • S Lakshmi Naaraayanan

    (Ph.D in Finance, Hong Kong University of Science and Technology)

Abstract

Does financing respond to changes in productive opportunities even for the world's poor? We shed light by examining the response of private bank financing to a rural road-building program in India. The program prioritized roads for villages above explicit population thresholds, allowing us to use discontinuities in treatment probability for identification. We find large financing responses - odds of a villager getting a loan is twice as high, and the average loan amounts are about 50% higher - for villages just above the threshold compared to those below. Benefits seem to flow disproportionately to those traditionally disadvantaged in rural societies.

Suggested Citation

  • Sumit Agarwal & Abhiroop Mukherjee & S Lakshmi Naaraayanan, 2019. "Roads and Loans," HKUST IEMS Working Paper Series 2019-61, HKUST Institute for Emerging Market Studies, revised May 2019.
    • Handle: RePEc:hku:wpaper:201961
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    References listed on IDEAS

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