File2-page134 - Burgess & Pande (2003) Credit and...

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Unformatted text preview: Burgess & Pande (2003) Credit and Microfinance of the 1:4 license policy yit = αi + βt + φ Bit + η1 [t − 1961] × Bi1961 R + η2 P1977 × Bi1961 + η3 P1990 × Bi1961 + uit where deviations from the linear state-specific trend, [t − 1961] × Bi1961 , which we characterize as [t − 1977] × Bi1961 and [t − 1990] × Bi1961 , are our instruments for BR . it Conclusions Evidence suggests that state led rural branch expansion has been central to tackling economic backwardness in India Rural branch expansion has been a key driver of structural change and economic growth Results counter widespread pessimism concerning potential of these types of programmes Central bank’s licensing policy enabled the development of an extensive rural branch network, and that this, in turn, allowed rural households to better accumulate capital and to obtain loans for longer term productive investments Lets do a Basic thought experiment – what happens when a bank opens in a village or small town? Answer seems to be that it helps households to start small businesses – informal manufacturing and services Engine for economic growth and poverty reduction At this point, mechanisms through which effects achieved unclear The paper is silent of whether intervention cost-effective relative to alternatives Development Economics, LSE Summer School 2007 131 ...
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This note was uploaded on 12/29/2011 for the course ECO 307 taught by Professor Dublin during the Spring '10 term at SUNY Stony Brook.

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