Affiliation:
1. CREST (email: )
2. American University in Cairo (email: )
3. University of Illinois Urbana-Champaign (email: )
Abstract
Is the type of financial support provided to businesses more important than which businesses receive it? Loans and grants can lead to differences in optimal investments and in scope for moral hazard. We randomize 3,293 business loan applicants into receiving a loan, cash grant, in-kind grant, or nothing. All treatments equally increase income, yet there are large differences within a treatment group with impacts concentrated at the top of the distribution. Those who succeed with loans are observationally equivalent to those who succeed with grants, showcasing that owner heterogeneity is more important than the type of support received in microenterprise development. (JEL D22, D82, G32, H81, J16, M13, O16)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
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