Using Experiments to Investigate Credit Constraints
Experiments provide a method to identify credit constraints by observing behavioral changes in response to an intervention. This involves randomly assigning individuals into two groups: a 'treatment' group that receives an intervention and a 'control' group that does not. For instance, the treatment could be giving a sum of money. A change in behavior, such as starting a business, among the treated individuals who are credit-constrained would be expected, as they previously lacked the funds for such a venture. Conversely, individuals who are not credit-constrained would have already secured a loan for a profitable idea, so receiving the money might not trigger the same behavioral change. By comparing the outcomes between the treatment and control groups, any significant differences can be causally linked to the intervention, thereby revealing the presence of credit constraints.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
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