Roads and Loans
HKUST IEMS Working Papers No. 2019-61
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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 a rural infrastructure program in India, which brought road access to unconnected villages. The program prioritized roads for villages above specific population thresholds, allowing us to exploit resulting discontinuities for identification. We find large financing responses to roads using detailed data from a large bank – 75% more villagers get loans, and the average amount lent to them is about 30-35% higher– for villages just above the threshold compared to those below.
Revised January 2021.
Acknowledgment
This research is supported by the Strategic Public Policy Research Funding Scheme from the Central Policy Unit of the HKSAR Government. More >>
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