Labelled loans and human capital investments

Arbeitspapier

Imperfect capital markets and commitment problems impede lumpy human capital investments. Labelled loans can alleviate both constraints, but little is known about their effectiveness in practice. We draw on a cluster randomized controlled trial in rural India to provide the first evidence that labelled microcredit is effective in increasing take-up of a lumpy human capital investment, a safe toilet. Testing predictions from a theoretical model provides novel evidence that loan labels influence household borrowing and investment decisions. Not all loans are used for sanitation investments, suggesting that loan labels offer a soft commitment incentive.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFS Working Paper ; No. W21/09

Classification and Topics

• Classification: Wirtschaft ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Household Saving; Personal Finance ; Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets‡ ; Health Behavior

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Augsburg, Britta ; Caeyers, Bet ; Giunti, Sara ; Malde, Bansi ; Smets, Susanna
• Event: Veröffentlichung
• (who): Institute for Fiscal Studies (IFS)
• (where): London
• (when): 2021

Further information

• DOI: doi:10.1920/wp.ifs.2021.921
• Handle: http://hdl.handle.net/10419/242908
• Last update: 10.03.2025, 11:42 AM CET