Britta Augsburg

Microfinance at the Margin: Experimental Evidence from Bosnia and Herzegovina

We use a randomised controlled trial (RCT) to analyse the impact of microcredit on poverty reduction in Bosnia and Herzegovina. The study population are loan appli-cants that would normally have just been rejected based on regular screening. We find that access to credit allowed borrowers to start and expand small-scale busi-nesses. Households that already had a business and where the borrower had more education, ran down their savings, presumably to complement the loan and to achieve the minimum amount necessary to expand their business. In less-educated households, however, consumption went down. A key new result is that there was a substantial increase in the labour supply of young adults (16-19 year olds). This was accompanied by a reduction in school attendance.

Subjective Expectations and Income Processes in Rural India

This paper uses unique primary data on directly elicited individual subjective expectations to analyse and characterize the process that generates the income of poor, rural Indian households. We validate and use responses to subjective expectations questions and a parametric assumption to fit a household-specific probability distribution for future income. Combining computed moments from this distribution with data for actual current income, we specify and estimate a dynamic model of household income. We find that our households face a very persistent income process. Our paper is one of the first that uses subjective expectations data to model income processes.

Holy Cows or Cash Cows? The Economic Return to Livestock in Rural India

This paper revisits recent claims that poor households owning cattle in developing countries settings do not behave according to the tenets of capitalism. We point out that the discussion was based on evidence from one single year only, while cows and buffalos are assets whose return varies through time. In drought years, when fodder is scarce and more expensive, milk production is lower and profits are low. In nondrought years, when fodder is abundant and cheaper, milk production is higher and profits can be considerably higher. Therefore, the return on cows and buffalos, like that of many stocks traded on Wall Street, is positive in some years and negative in others. The fact that in a given year the observed return on a risky asset is negative could certainly not be used as a contradiction of one of the basic tenets of capitalism. We report evidence from 3 years of data on the return on cows and buffalos in the district of Anantapur and show that in one of the 3 years returns are very high, while in drought years they are predominantly negative.

Microcredit Contracts, Risk Diversification and Loan Take-Up

We study theoretically and empirically the demand for microcredit under different liability arrangements and risk environments. A simple theoretical model shows that the demand for joint-liability loans can exceed that for individual-liability loans when risk-averse borrowers value their long-term relationship with the lender. Joint liability then offers a way to diversify risk and to reduce the chance of losing access to future loans. We also show that the demand for loans depends negatively on the riskiness of projects. Using data from a randomized controlled trial in Mongolia we find that these model predictions hold true empirically. In particular, we use innovative data on subjective risk perceptions to show that expected project risk negatively affects the demand for loans. In line with an insurance role of joint-liability contracts, this effect is muted in villages where joint-liability loans are available.

Sanitation and child health in India

Our study contributes to the understanding of key drivers of stunted growth, a factor widely recognized as major impediment to human capital development. Specifically, we examine the effects of sanitation coverage and usage on child height for age in a semi-urban setting in Northern India. We use instrumental variables to control for endogeneity of sanitation usage coverage. We find that sanitation coverage plays a significant and positive role in height growth during the first years of life. JEL I12