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Consumer Surplus with Incomplete Markets : Applications to Savings and Microfinance

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  • Loeser,John Ashton

Abstract

The household welfare gains from financial inclusion are empirically elusive. This paperestablishes that household welfare gains from a financial technology are equal to the area under dynamicallycompensated demand in a household model with incomplete financial markets, and general technology, preferences, andchoice sets. This paper then estimates compensated demand for financial technologies leveraging three randomizedcontrol trials that introduce experimental variation in interest rates. Welfare gains per dollar lent or saved aresmall as compensated demand elasticities are large, but still correspond to large aggregate welfare gains fromfinancial inclusion.

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  • Loeser,John Ashton, 2023. "Consumer Surplus with Incomplete Markets : Applications to Savings and Microfinance," Policy Research Working Paper Series 10481, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10481
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