Is It Who You Are or What You Get? Comparing the Impacts of Loans and Grants for Microenterprise Development
American Economic Journal: Applied Economics
vol. 16,
no. 1, January 2024
(pp. 286-313)
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.Citation
Crépon, Bruno, Mohamed El Komi, and Adam Osman. 2024. "Is It Who You Are or What You Get? Comparing the Impacts of Loans and Grants for Microenterprise Development." American Economic Journal: Applied Economics, 16 (1): 286-313. DOI: 10.1257/app.20210683Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D82 Asymmetric and Private Information; Mechanism Design
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- H81 Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
- J16 Economics of Gender; Non-labor Discrimination
- M13 New Firms; Startups
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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