While remarkable repayment rates have been achieved in microcredit group lending, anecdotal evidence from the …eld suggests that there is excessive peer punishment among group members. To measure excessive peer monitoring and punishment and to study their e¤ect on repayment, I conduct a lab-in-the-…eld experiment with actual microcredit borrowers in rural India. I design a repayment coordination game with strategic default and the possibility of acquiring information about a peer's investment return (peer peeking) or of sanctioning a peer (peer punishment). I observe loan repayment of over 90 percent and excessive peeking and punishment of around 85 percent. The experimental results give rigid support to the anecdotal evidence and they inform the debate on whether microcredit institutions should move away from joint-liability group lending. While non-cooperative game theory can explain the high repayment under consideration of risk-averse preferences, it fails to predict the use of peer peeking and punishment. The most promising alternative explanation is that borrowers have internalized the mission indoctrination of the microlender of what constitutes a good borrower, namely repaying loans and disciplining peers.
Microcredit institutions typically apply rigid and …xed repayment schedules when disbursing loans in order to reduce transaction costs, simplify procedures, and inculcate …scal discipline for better repayment behavior. Microcredit clients, however, often have neither smooth income nor singular moments in which to make lumpy investments throughout the year. This mismatch generates a cash ‡ow disconnect and, given the presumed liquidity constraints of the typical microcredit client, a potential welfare loss. Using data from a randomized evaluation with dairy farmers in rural India, we test the impact of ‡exible microcredit repayment schedules relative to "normal" in ‡exible, …xed repayment schedules. Although we are only able to track those who borrow, which introduces potential selection e¤ects, we …nd amongst those in ‡exible lending groups some evidence for higher ability to absorb shocks and higher income, which seems to be driven by limited improvements in investment and higher production from milk. On the cost-side, defaults do increase for the lender. Towards the end of the study, the microcredit market encountered crisis, with mass defaults, thus it is hard to generalize with respect to the default results. We conclude with caution, that we have shown suggestive evidence that a more ‡exible product design, one tailored to the needs of a dairy farmer, may be welfare enhancing for the dairy farmer. Further work is needed to both validate these results, and explore how to balance any trade-o¤ with default.
ISBN 978-80-7343-456-4 (Univerzita Karlova, Centrum pro ekonomický výzkum a doktorské studium) ISBN 978-80-7344-513-3 (Národohospodářský ústav AV ČR, v. v. i.)
AbstractWe conducted a randomised controlled trial (RCT) on a sample of 1,000 female garment workers in three factories in Bangladesh, offering access to free sanitary pads at work to 500 of the workers. We cross-randomised participation in information sessions for hygienic menstrual health care implemented by an experienced local NGO, and we vary the salience of commonly perceived taboos in the pad collection process. We find effects of the free pads and information sessions on self-reported pad use, but not of the taboo variations. We find effects on absenteeism and adherence to traditional restrictive and health-adverse taboos surrounding menstruation, but not on worker turnover or self-reported well-being at work.
We conducted a laboratory‐in‐the‐field experiment with real‐life tenants in Ethiopia to test the incentive effects of fixed wage, sharecropping, fixed rent, and ownership contracts. The experimental task resembles a common process in agricultural production. The sharecropping contract is a piece rate scheme framed as a profit‐sharing agreement. Sharecropping output was about 12 percent smaller than the fixed rent output. Surprisingly, it is statistically indistinguishable from the fixed wage output, despite substantial piece rates. This effect is driven by real‐life sharecroppers. Their sharecropping output was smaller than that of non‐sharecroppers, especially in a region where a controversial land reform took place. We argue that our subjects dislike sharecropping contracts because of the unfair profit sharing and the disputed allocation of land. Fairness concerns, therefore, may be another impediment to efficiency under the sharecropping contract.
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