Imperfect capital markets and commitment problems impede lumpy human capital investments. Labeled loans have been postulated as a potential solution to both constraints, but little is known about the role of the label in influencing investment choices in practice. We draw on a cluster randomized controlled trial in rural India to test predictions from a theoretical model, providing novel evidence that labeled microcredit is effective in influencing household borrowing and investment decisions and increasing take-up of a lumpy human capital investment, a toilet.
Augsburg, B., Caeyers, B., Giunti, S., Malde, B., Smets, S. (2023). Labeled loans and human capital investments. JOURNAL OF DEVELOPMENT ECONOMICS, 162(May 2023) [10.1016/j.jdeveco.2023.103053].
Labeled loans and human capital investments
Sara Giunti;
2023
Abstract
Imperfect capital markets and commitment problems impede lumpy human capital investments. Labeled loans have been postulated as a potential solution to both constraints, but little is known about the role of the label in influencing investment choices in practice. We draw on a cluster randomized controlled trial in rural India to test predictions from a theoretical model, providing novel evidence that labeled microcredit is effective in influencing household borrowing and investment decisions and increasing take-up of a lumpy human capital investment, a toilet.
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