GROUP LENDING WITH HETEROGENEOUS TYPES |
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| Authors: | Li Gan Manuel A Hernandez Yanyan Liu |
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| Institution: | 1. 979‐862‐1667979‐847‐8757;2. Professor, Department of Economics, Texas A&M University and NBER, College Station, TX 77843;3. 202‐862‐5645202‐467‐4439;4. Research Fellow, Markets, Trade and Institutions Division, International Food Policy Research Institute 5. – 6. IFPRI, Washington, DC 20006 |
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| Abstract: | This paper proposes and implements a mixture structure to model repayment behavior in group lending with unobserved group heterogeneity. We discuss the model properties and identification and estimate the model using a rich dataset from a group lending program in India. The estimation results support the existence of two different group types: “responsible” and “irresponsible” groups. We find that the effects of the factors driving repayment behavior differ across types. The model also shows a higher predictive performance than standard probabilistic models, particularly in the identification of potential defaulters. We provide evidence supporting the robustness of our estimations. (JEL O16, C35) |
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