Social groups and credit shocks: evidence of inequalities in consumption smoothing

Vibhor Saxena, Ishaan Bindal, Philippe LeMay-Boucher

    Research output: Working paperDiscussion paper

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    A strand of research holds the view that restricting access to credit to regulate over-borrowing can worsen consumers’ financial condition. Another strand of research holds the view that access to credit in the developing countries with subprime credit markets is determined by social groupings and ethnic affiliations. By merging these two strands of research, we investigate the impact of Andhra Pradesh microfinance act (2010) on the consumption expenditure of marginalised social groups and the upper caste Hindu groups in India. We construct an aggregated district level panel data for eight quarters and estimate the impact of unanticipated policy change. The results of our analysis show that the sudden restriction of access to credit has larger impact on the consumption levels of the marginalised social groups: lower castes, tribes, and Muslims. The findings also confirm the failure of contingency policy enacted for smoothing consumption.
    Original languageEnglish
    Place of PublicationSt Andrews
    PublisherUniversity of St Andrews
    Number of pages28
    Publication statusPublished - 31 Jan 2019

    Publication series

    NameSchool of Economics and Finance Discussion Paper
    PublisherUniversity of St Andrews
    ISSN (Print)0962-4031
    ISSN (Electronic)2055-303X


    • Financial deleveraging
    • Social insurance
    • Consumption smoothing
    • Microfinance
    • Andhra Pradesh


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