Empirical evidence on peer intermediation lags behind both theory and practice in which lenders use peers to mitigate adverse selection and moral hazard. Using a referral incentive under individual liability, we develop a two-stage field experiment that permits separate identification of peer screening and enforcement. Our key contribution is to allow for borrower heterogeneity in both ex ante repayment type and ex post susceptibility to social pressure. Our method allows identification of selection on repayment likelihood, selection on susceptibility to social pressure, and loan enforcement. Implementing our method in South Africa we find no evidence of screening but large enforcement effects. (JEL D14, D82, G21, O12, O16)
Bryan, Gharad, Dean Karlan, and Jonathan Zinman.
"Referrals: Peer Screening and Enforcement in a Consumer Credit Field Experiment."
American Economic Journal: Microeconomics,
Household Saving; Personal Finance
Asymmetric and Private Information; Mechanism Design
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Microeconomic Analyses of Economic Development
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance