Karlan and Zinman (2009) design an experiment where: ....... (hint: groups?)
group 1 is offered the low interest rate, and once signed up, given the low interest rate
group 2 is offered the high interest rate and once signed up given the low interest rate
group 3 is offered the high interest rate and once signed up given the high
offers small, ...... interest, short term, ................ credit with fixed ............
high interest
uncollateralized credit
fixed monthly repayment schedules
large ....... micro lenders
South African
Karlan and Zinman (2009) design an experiment where:
group 1 is offered the low interest rate, and once signed up, given the low interest rate
group 2 is offered the high interest rate and once signed up given the low interest rate
group 3 is offered the
test for moral hazard
cash loan sizes tend to be small relative to the ........................... and monitoring them but substantial relative to a typical borrowers income
fixed costs of underwriting
the lenders normal 4-month rates, absent the experiment =
7.75% - 11.75% per month depending on observable risk
...% of clients in the high-risk category
75%
repeat borrowers had default rates of about ....%
15%
first time borrowers defaulted ...... as often
twice
sample: .......... former clients with good repayment histories. Everyone had borrowed from the lender with the past ..... months and did not have a loan outstanding in the ..... days prior to the offer
57,533
24 months
30 days prior
results: data could not reject the null that ............ at this interest rate margin and pool of borrowers
null that adverse selection is not important (implying that adverse selection is not important)
results: was a very selected pool of...........
former clients with good repayment
results: there is some evidence that ............ is important especially from the ................ experiment
moral hazard
dynamic incentives experiemnt
a positive coefficient on the contract rate or dynamic repayment incentive variables indicated hidden actions (moral hazard)