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Sep
30
UCLouvain Economics Seminar - Lisa Spantig, RWTH Aachen / Essex
By UCLouvain Economics Seminar

Lisa Spantig

RWTH Aachen / Essex

will give a presentation on

Flexible Microcredit: Effects on Loan Repayment and Social Pressure

Abstract:

Flexible repayment benefits borrowers, but practitioners fear diminished repayment morale. We study repayment choices in rigid and flexible loan contracts with discretion in repayment timing. Using a lab-in-the-field experiment with microcredit borrowers in the Philippines, we identify moral hazard and quantify social pressure. In our rigid benchmark contract, repayment is higher than payoff maximization predicts. Flexibility substantially lowers both repayment and social pressure. Our results are consistent with a strong social norm for repayment, which is weakened by introducing flexibility. This suggests that cooperative behavior determined by social norms may erode if the applicability of these norms is not straightforward.

(joint with K. Czura and A. John)

Date
30 September
Time
12:45 - 14:00
Location
Doyen 22
Place des Doyens, 1
Ottignies-Louvain-la-Neuve,
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