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Unformatted text preview: Burgess & Pande (2003) Credit and Microfinance 1.2 Initial financial development X year 0.7 0.2 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 -0.3 -0.8 -1.3 year rural branches in unbanked locations (with controls) rural branches in unbanked locations (implied pattern) FIGURE 1: INITIAL FINANCIAL DEVELOPMENT AND BRANCH EXPANSION INTO RURAL UNBANKED LOCATIONS Notes: The series `rural branches in unbanked locations (with controls)’ graphs the yearwise coefficients on initial financial development (measured as number of bank branches in 1961) from a regression of the form described in equation (2). The series `rural branches in unbanked locations (implied pattern)’ graphs the yearwise coefficients implied by the trend break model in column (1), Table 1. In both cases the dependent variable is the number of rural branches opened in unbanked locations. opened per capita in rural un-banked locations in state i and year t ; Splice this with panel data set on different elements of output for the period 1961-2000 Identification Strategy What is the relationship between initial financial development of a state and subsequent rural branch expansion? BR = αi + βt + γt × Bi1961 + δt × Xi1961 + εit it Our measure of initial financial development (Bi1961 ) enters the regression interacted with year dummies, with t denoting the year-specific coefficients the difference between t + 1 and t tells us how a state’s initial financial development affected rural branch growth between years t and t + 1. Trend Break Model Development Economics, LSE Summer School 2007 124 ...
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