What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households
This paper studies the impact of a large debt relief program, intended to attenuate investment constraints among highly-indebted households in rural India. It isolates the causal effect of bankruptcy-like debt relief settlements using a natural exp...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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2013
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| Online Access: | http://documents.worldbank.org/curated/en/2012/11/16920501/debt-relief-development-evidence-indias-bailout-program-highly-indebted-rural-households http://hdl.handle.net/10986/12110 |
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okr-10986-12110 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
ACCESS TO CREDIT ACCESS TO FINANCE ACCESS TO FORMAL CREDIT ACCESS TO SAVINGS AGRICULTURAL ACTIVITIES AGRICULTURAL CREDIT AGRICULTURAL DEBT AGRICULTURAL LOANS AGRICULTURAL SECTOR AMOUNT OF DEBT BAILOUT BAILOUTS BANK ACCOUNTS BANK BRANCH BANK BRANCHES BANK CREDIT BANK DEBT BANK FINANCING BANK LOAN BANK LOANS BANKRUPTCY BANKRUPTCY DECISION BANKRUPTCY LAWS BANKRUPTCY REGULATION BANKS BENEFICIARIES BENEFICIARY BORROWER BORROWER BEHAVIOR BORROWING CASH PAYMENTS CASH TRANSFERS CENTRAL BANK CHECKS COLLATERAL COMMERCIAL BANK COMMERCIAL BANKS CONDITIONAL DEBT CONSUMER BANKRUPTCY CONSUMER CREDIT CONSUMPTION EXPENDITURES COOPERATIVE BANK COOPERATIVE BANKS COOPERATIVES CORPORATE BORROWING CORRUPTION CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT COOPERATIVE CREDIT COOPERATIVES CREDIT CULTURE CREDIT EXPANSION CREDIT MARKET CREDIT MARKETS CREDIT RATIONING CREDIT RELATIONSHIP CREDIT RELATIONSHIPS CREDITOR CREDITOR RIGHTS CREDITORS CREDITWORTHINESS CROP LOAN CROP LOANS CROP VALUE DEBT DEBT BURDEN DEBT CONTRACT DEBT CONTRACTS DEBT FORGIVENESS DEBT HOLDERS DEBT OVERHANG DEBT RECOVERY DEBT RELIEF DEBT RESTRUCTURING DEBT SERVICE DEBTORS DEBTS DECLINE IN INVESTMENT DEFAULTER DEFAULTERS DEFAULTS DEPENDENT DEVELOPING COUNTRIES DISBURSEMENT DISCRIMINATION DUMMY VARIABLE ECONOMIC DECISIONS EFFECT OF BANKRUPTCY EFFECT OF DEBT ELIGIBILITY CRITERIA ELIGIBLE DEBT EMERGING CREDIT EMERGING ¸ MARKETS ENFORCEABILITY ENFORCEABILITY OF DEBT CONTRACTS ENFORCEMENT OF LOAN ENFORCEMENT OF LOAN CONTRACTS EX-ANTE INCENTIVES EXISTING CREDIT EXISTING DEBT EXPENDITURE EXPENDITURES EXTERNAL BORROWING FACE VALUE FARM LOANS FARMER FARMERS FEDERAL RESERVE FINANCIAL ACCESS FINANCIAL INSTRUMENTS FINANCIAL POSITION FINANCIAL SERVICES FINANCIAL SUPPORT FINANCING REQUIREMENTS FORMAL LENDING FUTURE CREDIT GENDER GOVERNMENT INTERVENTIONS HOUSEHOLD DEBT HOUSEHOLD FINANCE HOUSEHOLD INCOME HOUSEHOLD INVESTMENT HOUSEHOLD WEALTH HOUSEHOLD WELFARE HOUSEHOLDS HUSBAND IMPACT OF DEBT INCOME SHOCKS INDEBTED INDEBTED HOUSEHOLDS INDEBTEDNESS INEQUALITY INFORMAL CREDIT INFORMAL FINANCING INFORMAL LENDERS INFORMAL LOANS INFORMAL SECTOR LENDERS INFORMATION ASYMMETRIES INSTITUTIONAL CREDIT INSTITUTIONAL LENDERS INSURANCE INTEREST RATE INTEREST RATES INTERNAL AUDITS INTERNAL FINANCING INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTMENT BEHAVIOR INVESTMENT CHOICE INVESTMENT DECISION INVESTMENT DECISIONS INVESTMENT LOANS INVESTMENT OPPORTUNITIES INVESTMENT SPENDING LAND HOLDING LAND RECORDS LANDOWNERS LARGE DEBT LEGAL REFORM LENDER LENDERS LEVEL OF DEBT LINE OF CREDIT LIQUID ASSETS LIQUIDITY LIQUIDITY CONSTRAINTS LOAN LOAN AMOUNTS LOAN APPLICATIONS LOAN CATEGORY LOAN CHARACTERISTICS LOAN CONTRACTS LOAN REPAYMENT LOAN SIZE LOANS FROM BANKS LOANS FROM FRIENDS LOCAL BANK LOWER-INCOME BORROWERS MARKET DISCIPLINE MARKET DISTORTIONS MARKET FAILURES MICRO-ENTERPRISE MICRO-ENTREPRENEURS MICROCREDIT MICROENTERPRISES MICROFINANCE MONEYLENDERS MORAL HAZARD NATIONAL DEBT NEW BANK CREDIT OUTSTANDING BALANCE OUTSTANDING DEBT OUTSTANDING LOANS OVERDUE LOAN OWNERSHIP STRUCTURE PERSONAL BANKRUPTCY PHYSICAL CAPITAL POLITICAL ECONOMY POVERTIES PRIVATE CREDIT PRODUCTIVE INVESTMENT PRODUCTIVITY PROTECTION OF CREDITOR REPAYMENT REPAYMENT DIFFICULTIES REPAYMENT INCENTIVES RESERVE BANK RESIDUAL CLAIMANTS RETURN RETURNS REVOLVING LINE OF CREDIT RISK OF DEFAULT RISK OF FRAUD RURAL BANKS RURAL CREDIT SAVINGS ACCOUNTS SETTLEMENT SETTLEMENTS SOCIAL BANKING SOURCE OF INCOME SOURCES OF CREDIT SOVEREIGN DEBT SUPPLY OF CREDIT TOTAL DEBT TRANSPARENCY URBAN AREAS VALUE OF DEBT VILLAGE VILLAGES VOLATILE INCOMES |
| spellingShingle |
ACCESS TO CREDIT ACCESS TO FINANCE ACCESS TO FORMAL CREDIT ACCESS TO SAVINGS AGRICULTURAL ACTIVITIES AGRICULTURAL CREDIT AGRICULTURAL DEBT AGRICULTURAL LOANS AGRICULTURAL SECTOR AMOUNT OF DEBT BAILOUT BAILOUTS BANK ACCOUNTS BANK BRANCH BANK BRANCHES BANK CREDIT BANK DEBT BANK FINANCING BANK LOAN BANK LOANS BANKRUPTCY BANKRUPTCY DECISION BANKRUPTCY LAWS BANKRUPTCY REGULATION BANKS BENEFICIARIES BENEFICIARY BORROWER BORROWER BEHAVIOR BORROWING CASH PAYMENTS CASH TRANSFERS CENTRAL BANK CHECKS COLLATERAL COMMERCIAL BANK COMMERCIAL BANKS CONDITIONAL DEBT CONSUMER BANKRUPTCY CONSUMER CREDIT CONSUMPTION EXPENDITURES COOPERATIVE BANK COOPERATIVE BANKS COOPERATIVES CORPORATE BORROWING CORRUPTION CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT COOPERATIVE CREDIT COOPERATIVES CREDIT CULTURE CREDIT EXPANSION CREDIT MARKET CREDIT MARKETS CREDIT RATIONING CREDIT RELATIONSHIP CREDIT RELATIONSHIPS CREDITOR CREDITOR RIGHTS CREDITORS CREDITWORTHINESS CROP LOAN CROP LOANS CROP VALUE DEBT DEBT BURDEN DEBT CONTRACT DEBT CONTRACTS DEBT FORGIVENESS DEBT HOLDERS DEBT OVERHANG DEBT RECOVERY DEBT RELIEF DEBT RESTRUCTURING DEBT SERVICE DEBTORS DEBTS DECLINE IN INVESTMENT DEFAULTER DEFAULTERS DEFAULTS DEPENDENT DEVELOPING COUNTRIES DISBURSEMENT DISCRIMINATION DUMMY VARIABLE ECONOMIC DECISIONS EFFECT OF BANKRUPTCY EFFECT OF DEBT ELIGIBILITY CRITERIA ELIGIBLE DEBT EMERGING CREDIT EMERGING ¸ MARKETS ENFORCEABILITY ENFORCEABILITY OF DEBT CONTRACTS ENFORCEMENT OF LOAN ENFORCEMENT OF LOAN CONTRACTS EX-ANTE INCENTIVES EXISTING CREDIT EXISTING DEBT EXPENDITURE EXPENDITURES EXTERNAL BORROWING FACE VALUE FARM LOANS FARMER FARMERS FEDERAL RESERVE FINANCIAL ACCESS FINANCIAL INSTRUMENTS FINANCIAL POSITION FINANCIAL SERVICES FINANCIAL SUPPORT FINANCING REQUIREMENTS FORMAL LENDING FUTURE CREDIT GENDER GOVERNMENT INTERVENTIONS HOUSEHOLD DEBT HOUSEHOLD FINANCE HOUSEHOLD INCOME HOUSEHOLD INVESTMENT HOUSEHOLD WEALTH HOUSEHOLD WELFARE HOUSEHOLDS HUSBAND IMPACT OF DEBT INCOME SHOCKS INDEBTED INDEBTED HOUSEHOLDS INDEBTEDNESS INEQUALITY INFORMAL CREDIT INFORMAL FINANCING INFORMAL LENDERS INFORMAL LOANS INFORMAL SECTOR LENDERS INFORMATION ASYMMETRIES INSTITUTIONAL CREDIT INSTITUTIONAL LENDERS INSURANCE INTEREST RATE INTEREST RATES INTERNAL AUDITS INTERNAL FINANCING INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTMENT BEHAVIOR INVESTMENT CHOICE INVESTMENT DECISION INVESTMENT DECISIONS INVESTMENT LOANS INVESTMENT OPPORTUNITIES INVESTMENT SPENDING LAND HOLDING LAND RECORDS LANDOWNERS LARGE DEBT LEGAL REFORM LENDER LENDERS LEVEL OF DEBT LINE OF CREDIT LIQUID ASSETS LIQUIDITY LIQUIDITY CONSTRAINTS LOAN LOAN AMOUNTS LOAN APPLICATIONS LOAN CATEGORY LOAN CHARACTERISTICS LOAN CONTRACTS LOAN REPAYMENT LOAN SIZE LOANS FROM BANKS LOANS FROM FRIENDS LOCAL BANK LOWER-INCOME BORROWERS MARKET DISCIPLINE MARKET DISTORTIONS MARKET FAILURES MICRO-ENTERPRISE MICRO-ENTREPRENEURS MICROCREDIT MICROENTERPRISES MICROFINANCE MONEYLENDERS MORAL HAZARD NATIONAL DEBT NEW BANK CREDIT OUTSTANDING BALANCE OUTSTANDING DEBT OUTSTANDING LOANS OVERDUE LOAN OWNERSHIP STRUCTURE PERSONAL BANKRUPTCY PHYSICAL CAPITAL POLITICAL ECONOMY POVERTIES PRIVATE CREDIT PRODUCTIVE INVESTMENT PRODUCTIVITY PROTECTION OF CREDITOR REPAYMENT REPAYMENT DIFFICULTIES REPAYMENT INCENTIVES RESERVE BANK RESIDUAL CLAIMANTS RETURN RETURNS REVOLVING LINE OF CREDIT RISK OF DEFAULT RISK OF FRAUD RURAL BANKS RURAL CREDIT SAVINGS ACCOUNTS SETTLEMENT SETTLEMENTS SOCIAL BANKING SOURCE OF INCOME SOURCES OF CREDIT SOVEREIGN DEBT SUPPLY OF CREDIT TOTAL DEBT TRANSPARENCY URBAN AREAS VALUE OF DEBT VILLAGE VILLAGES VOLATILE INCOMES Kanz, Martin What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households |
| geographic_facet |
South Asia India |
| relation |
Policy Research Working Paper; No. 6258 |
| description |
This paper studies the impact of a large
debt relief program, intended to attenuate investment
constraints among highly-indebted households in rural India.
It isolates the causal effect of bankruptcy-like debt relief
settlements using a natural experiment arising from
India's Debt Relief Program for Small and Marginal
Farmers -- one of the largest debt relief initiatives in
history. The analysis shows that debt relief has a
persistent effect on the level of household debt, but does
not increase investment and productivity as predicted by
theories of debt overhang. Instead, the anticipation of
future credit constraints leads to a greater reliance on
informal financing, lower investment and a decline in
productivity among bailout recipients. The results suggest
that one-time settlements may be insufficient to incentivize
new investment, but can have significant real effects
through their impact on borrower expectations. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Kanz, Martin |
| author_facet |
Kanz, Martin |
| author_sort |
Kanz, Martin |
| title |
What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households |
| title_short |
What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households |
| title_full |
What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households |
| title_fullStr |
What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households |
| title_full_unstemmed |
What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households |
| title_sort |
what does debt relief do for development? evidence from india’s bailout program for highly-indebted rural households |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2012/11/16920501/debt-relief-development-evidence-indias-bailout-program-highly-indebted-rural-households http://hdl.handle.net/10986/12110 |
| _version_ |
1764419031402545152 |
| spelling |
okr-10986-121102021-04-23T14:02:59Z What Does Debt Relief Do for Development? Evidence from India’s Bailout Program for Highly-Indebted Rural Households Kanz, Martin ACCESS TO CREDIT ACCESS TO FINANCE ACCESS TO FORMAL CREDIT ACCESS TO SAVINGS AGRICULTURAL ACTIVITIES AGRICULTURAL CREDIT AGRICULTURAL DEBT AGRICULTURAL LOANS AGRICULTURAL SECTOR AMOUNT OF DEBT BAILOUT BAILOUTS BANK ACCOUNTS BANK BRANCH BANK BRANCHES BANK CREDIT BANK DEBT BANK FINANCING BANK LOAN BANK LOANS BANKRUPTCY BANKRUPTCY DECISION BANKRUPTCY LAWS BANKRUPTCY REGULATION BANKS BENEFICIARIES BENEFICIARY BORROWER BORROWER BEHAVIOR BORROWING CASH PAYMENTS CASH TRANSFERS CENTRAL BANK CHECKS COLLATERAL COMMERCIAL BANK COMMERCIAL BANKS CONDITIONAL DEBT CONSUMER BANKRUPTCY CONSUMER CREDIT CONSUMPTION EXPENDITURES COOPERATIVE BANK COOPERATIVE BANKS COOPERATIVES CORPORATE BORROWING CORRUPTION CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT COOPERATIVE CREDIT COOPERATIVES CREDIT CULTURE CREDIT EXPANSION CREDIT MARKET CREDIT MARKETS CREDIT RATIONING CREDIT RELATIONSHIP CREDIT RELATIONSHIPS CREDITOR CREDITOR RIGHTS CREDITORS CREDITWORTHINESS CROP LOAN CROP LOANS CROP VALUE DEBT DEBT BURDEN DEBT CONTRACT DEBT CONTRACTS DEBT FORGIVENESS DEBT HOLDERS DEBT OVERHANG DEBT RECOVERY DEBT RELIEF DEBT RESTRUCTURING DEBT SERVICE DEBTORS DEBTS DECLINE IN INVESTMENT DEFAULTER DEFAULTERS DEFAULTS DEPENDENT DEVELOPING COUNTRIES DISBURSEMENT DISCRIMINATION DUMMY VARIABLE ECONOMIC DECISIONS EFFECT OF BANKRUPTCY EFFECT OF DEBT ELIGIBILITY CRITERIA ELIGIBLE DEBT EMERGING CREDIT EMERGING ¸ MARKETS ENFORCEABILITY ENFORCEABILITY OF DEBT CONTRACTS ENFORCEMENT OF LOAN ENFORCEMENT OF LOAN CONTRACTS EX-ANTE INCENTIVES EXISTING CREDIT EXISTING DEBT EXPENDITURE EXPENDITURES EXTERNAL BORROWING FACE VALUE FARM LOANS FARMER FARMERS FEDERAL RESERVE FINANCIAL ACCESS FINANCIAL INSTRUMENTS FINANCIAL POSITION FINANCIAL SERVICES FINANCIAL SUPPORT FINANCING REQUIREMENTS FORMAL LENDING FUTURE CREDIT GENDER GOVERNMENT INTERVENTIONS HOUSEHOLD DEBT HOUSEHOLD FINANCE HOUSEHOLD INCOME HOUSEHOLD INVESTMENT HOUSEHOLD WEALTH HOUSEHOLD WELFARE HOUSEHOLDS HUSBAND IMPACT OF DEBT INCOME SHOCKS INDEBTED INDEBTED HOUSEHOLDS INDEBTEDNESS INEQUALITY INFORMAL CREDIT INFORMAL FINANCING INFORMAL LENDERS INFORMAL LOANS INFORMAL SECTOR LENDERS INFORMATION ASYMMETRIES INSTITUTIONAL CREDIT INSTITUTIONAL LENDERS INSURANCE INTEREST RATE INTEREST RATES INTERNAL AUDITS INTERNAL FINANCING INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INVESTMENT BEHAVIOR INVESTMENT CHOICE INVESTMENT DECISION INVESTMENT DECISIONS INVESTMENT LOANS INVESTMENT OPPORTUNITIES INVESTMENT SPENDING LAND HOLDING LAND RECORDS LANDOWNERS LARGE DEBT LEGAL REFORM LENDER LENDERS LEVEL OF DEBT LINE OF CREDIT LIQUID ASSETS LIQUIDITY LIQUIDITY CONSTRAINTS LOAN LOAN AMOUNTS LOAN APPLICATIONS LOAN CATEGORY LOAN CHARACTERISTICS LOAN CONTRACTS LOAN REPAYMENT LOAN SIZE LOANS FROM BANKS LOANS FROM FRIENDS LOCAL BANK LOWER-INCOME BORROWERS MARKET DISCIPLINE MARKET DISTORTIONS MARKET FAILURES MICRO-ENTERPRISE MICRO-ENTREPRENEURS MICROCREDIT MICROENTERPRISES MICROFINANCE MONEYLENDERS MORAL HAZARD NATIONAL DEBT NEW BANK CREDIT OUTSTANDING BALANCE OUTSTANDING DEBT OUTSTANDING LOANS OVERDUE LOAN OWNERSHIP STRUCTURE PERSONAL BANKRUPTCY PHYSICAL CAPITAL POLITICAL ECONOMY POVERTIES PRIVATE CREDIT PRODUCTIVE INVESTMENT PRODUCTIVITY PROTECTION OF CREDITOR REPAYMENT REPAYMENT DIFFICULTIES REPAYMENT INCENTIVES RESERVE BANK RESIDUAL CLAIMANTS RETURN RETURNS REVOLVING LINE OF CREDIT RISK OF DEFAULT RISK OF FRAUD RURAL BANKS RURAL CREDIT SAVINGS ACCOUNTS SETTLEMENT SETTLEMENTS SOCIAL BANKING SOURCE OF INCOME SOURCES OF CREDIT SOVEREIGN DEBT SUPPLY OF CREDIT TOTAL DEBT TRANSPARENCY URBAN AREAS VALUE OF DEBT VILLAGE VILLAGES VOLATILE INCOMES This paper studies the impact of a large debt relief program, intended to attenuate investment constraints among highly-indebted households in rural India. It isolates the causal effect of bankruptcy-like debt relief settlements using a natural experiment arising from India's Debt Relief Program for Small and Marginal Farmers -- one of the largest debt relief initiatives in history. The analysis shows that debt relief has a persistent effect on the level of household debt, but does not increase investment and productivity as predicted by theories of debt overhang. Instead, the anticipation of future credit constraints leads to a greater reliance on informal financing, lower investment and a decline in productivity among bailout recipients. The results suggest that one-time settlements may be insufficient to incentivize new investment, but can have significant real effects through their impact on borrower expectations. 2013-01-04T21:21:44Z 2013-01-04T21:21:44Z 2012-11 http://documents.worldbank.org/curated/en/2012/11/16920501/debt-relief-development-evidence-indias-bailout-program-highly-indebted-rural-households http://hdl.handle.net/10986/12110 English en_US Policy Research Working Paper; No. 6258 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper Publications & Research South Asia India |