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GROUP LENDING WITH HETEROGENEOUS TYPES
Author(s) -
Gan Li,
Hernandez Manuel A.,
Liu Yanyan
Publication year - 2018
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12541
Subject(s) - robustness (evolution) , identification (biology) , econometrics , group (periodic table) , economics , estimation , probabilistic logic , group identification , group structure , group behavior , microeconomics , computer science , artificial intelligence , psychology , social psychology , chemistry , biochemistry , botany , management , organic chemistry , gene , biology , psychotherapist
This paper proposes and implements a mixture structure to model repayment behavior in group lending with unobserved group heterogeneity. We discuss the model properties and identification and estimate the model using a rich dataset from a group lending program in India. The estimation results support the existence of two different group types: “responsible” and “irresponsible” groups. We find that the effects of the factors driving repayment behavior differ across types. The model also shows a higher predictive performance than standard probabilistic models, particularly in the identification of potential defaulters. We provide evidence supporting the robustness of our estimations. ( JEL O16, C35)