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WP202020-Labelled-Loans-and-Human-Capital-Investments.pdf
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Making lumpy human capital investments is difficult, particularly since returns may accrue with a significant time lag. Lack of commitment impedes savings and diverts funds from intended investments. We draw on a cluster randomised controlled trial in rural India to provide the first evidence that labelled microcredit is effective in increasing take-up of a lumpy human capital investment, a safe toilet. Testing predictions from a theoretical model provides novel evidence that loan labels influence household borrowing and investment decisions. Not all loans are used for sanitation investments, suggesting that loan labels offer a soft commitment incentive.
Authors

Research Fellow City, University of London
Bansi is a Research Fellow of the IFS, a Senior Lecturer of Economics at the City, University of London and also a Fellow at the Global Labor Organisa

Associate Director
Britta is an IFS Associate Director, Associate Staff at the Department of Economics at the UC and Researcher at NIHR Obesity Policy Research Unit.

Research Associate Yale University, Stockholm University and FAIR/Norwegian School of Economics (NHH)
Bet is a Research Associate of the IFS who is an Adjunct Associate Professor at FAIR/Norwegian School of Economics (NHH).

Sara Giunti

Susanna Smets
Working Paper details
- DOI
- 10.1920/wp.ifs.2020.2020
- Publisher
- The IFS
Suggested citation
Augsburg, B et al. (2020). Labelled Loans and Human Capital Investments. London: The IFS. Available at: https://ifs.org.uk/publications/labelled-loans-and-human-capital-investments (accessed: 17 February 2025).
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