The Impact of Credit on Village Economies

Joseph Kaboski
Robert M. Townsend
Publication Type: 
Papers
Publication Article File: 
Journal Name: 
American Economic Journal: Applied Economics
Journal Volume: 
4
Journal Number: 
2
Pages: 
98-133
Publication Year: 
2012

This paper evaluates the short-term impact of Thailand’s Million Baht Village Fund program, among the largest scale government microfinance initiative in the world, using pre- and postprogram panel data and quasi-experimental cross-village variation in credit-per-household. We find that the village funds have increased total short-term credit, consumption, agricultural investment, income growth (from business and labor), but decreased overall asset growth. We also find a positive impact on wages, an important general equilibrium effect. The findings are broadly consistent qualitatively with models of credit-constrained household behavior and models of intermediation and growth.

Region: 
East Asia and the Pacific
Country: 
Thailand
Topic: 
Income and Wealth
Topic: 
General Equilibrium
Topic: 
Economic Modeling
Topic: 
Policy Evaluation
Topic: 
Microfinance
Topic: 
Credit
Topic: 
Consumption
Topic: 
Agriculture
Topic: 
Growth