Journal ArticleDOI
Precautionary Saving, Credit Constraints, and Irreversible Investment: Theory and Evidence From Serniarid India
Marcel Fafchamps,John Pender +1 more
TLDR
In this article, the authors investigate the extent to which poor households are discouraged from making a non-divisible but profitable investment using data on irrigation wells in India, and they estimate the parameters of a structural model of irreversible investment.Abstract:
This article investigates the extent to which poor households are discouraged from making a non-divisible but profitable investment. Using data on irrigation wells in India, we estimate the parameters of a structural model of irreversible investment. Results show that poor farmers fail to undertake a profitable investment that they could, in principle, self-finance because the nondivisibility of the investment puts it out of their reach. Irreversibility constitutes an additional disincentive to invest. Simulations show that the availability of credit can dramatically increase investment in irrigation and that interest-rate subsidization has little impact.read more
Citations
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Precautionary Saving in the Small and in the Large
TL;DR: The Arrow-Pratt theory of risk aversion was shown to be isomorphic to the theory of optimal choice under risk in this paper, making possible the application of a large body of knowledge about risk aversion to precautionary saving.
Journal ArticleDOI
Trade Liberalization and Poverty: The Evidence So Far
TL;DR: The authors assesses the current state of evidence on the impact of trade policy reform on poverty in developing countries and argues that there is no simple generalizable conclusion about the relationship between trade liberalization and poverty, and the picture is much less negative than is often suggested.
Journal ArticleDOI
Risk Sharing Networks in Rural Philippines
Marcel Fafchamps,Susan Lund +1 more
TL;DR: In this paper, the authors investigated how rural Filipino households deal with income and expenditure shocks using original data on gifts and loans, and found that gifts and informal loans are partly motivated by consumption smoothing motives but do not serve to efficiently share risk.
Journal ArticleDOI
Risk-Sharing Networks in Rural Philippines
Marcel Fafchamps,Susan Lund +1 more
TL;DR: In this paper, the authors investigate how rural Filipino households deal with income and expenditure shocks and find that shocks have a strong effect on gifts and informal loans, but little effect on sales of livestock and grain.
Journal ArticleDOI
Drought and Saving in West Africa: Are Livestock a Buffer Stock?
TL;DR: The authors found that livestock transactions play less of a consumption smoothing role than often assumed, and that livestock sales compensate for at most thirty percent, and probably closer to twenty percent of income shortfalls due to village-level shocks alone.
References
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Posted ContentDOI
Credit Rationing in Markets with Imperfect Information.
Joseph E. Stiglitz,Andrew Weiss +1 more
TL;DR: In this paper, a model is developed to provide the first theoretical justification for true credit rationing in a loan market, where the amount of the loan and amount of collateral demanded affect the behavior and distribution of borrowers, and interest rates serve as screening devices for evaluating risk.
Book
Investment Under Uncertainty
Avinash Dixit,Robert S. Pindyck +1 more
TL;DR: In this article, Dixit and Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made.
Journal ArticleDOI
Economic Development with Unlimited Supplies of Labour
TL;DR: In this article, the authors present a different framework for solving problems of distribution accumulation and growth first in a closed and then in an open economy, where the assumption of an unlimited labor supply is used.
Book
Money and capital in economic development
TL;DR: In this paper, the authors present a theory of economic development very different from the "stages of growth" hypothesis or strategies emphasizing foreign aid, trade, or regional association, focusing on the use of domestic capital markets to stimulate economic performance.
Journal ArticleDOI
Risk Aversion in the Small and in the Large
TL;DR: In this article, a measure of risk aversion in the small, the risk premium or insurance premium for an arbitrary risk, and a natural concept of decreasing risk aversion are discussed and related to one another.