GROUP LENDING WITH HETEROGENEOUS TYPES | Zendy

Gan Li | Zendy; Hernandez Manuel A. | Zendy; Liu Yanyan | Zendy

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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) , econometrics , identification (biology) , group (periodic table) , economics , estimation , probabilistic logic , group identification , group behavior , statistics , mathematics , psychology , social psychology , chemistry , biochemistry , botany , management , organic chemistry , biology , gene

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)

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