Contract Structure, Risk-Sharing, and Investment Choice

• 成果类型: Article
• 署名作者: Fischer, Greg
• 署名单位: University of London; London School Economics & Political Science
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA9100
• 发表日期: 2013
• 页码: 883-939
• 关键词: repayment incentives; Joint liability; insurance; microfinance; credit; COMMITMENT; efficient; failures; MARKET

摘要

Few microfinance-funded businesses grow beyond subsistence entrepreneurship. This paper considers one possible explanation: that the structure of existing microfinance contracts may discourage risky but high-expected-return investments. To explore this possibility, I develop a theory that unifies models of investment choice, informal risk-sharing, and formal financial contracts. I then test the predictions of this theory using a series of experiments with clients of a large microfinance institution in India. The experiments confirm the theoretical predictions that joint liability creates two potential inefficiencies. First, borrowers free-ride on their partners, making risky investments without compensating partners for this risk. Second, the addition of peer-monitoring overcompensates, leading to sharp reductions in risk-taking and profitability. Equity-like financing, in which partners share both the benefits and risks of more profitable projects, overcomes both of these inefficiencies and merits further testing in the field.