Paper

Microfinance and Home Improvement: Using Retrospective Panel Data to Measure Program Effects on Fundamental Events

Measuring welfare changes associated with development programs
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This paper presents a methodology, RETRAFECT, to estimate the effects of development programs.

RETRAFECT creates a retrospective panel data set based on fundamental events in the history of surveyed households that are discrete, unforgettable and important to welfare. Based on the relationship between changes in the estimated probabilities of these events and the timing of the introduction and uptake of a treatment, the paper ascertains if the probability of these events changes significantly after treatment. It presents a series of tests, diagnostics and corrections to account for potential supply-side and demand-side endogeneity problems in program rollout and adoption.

The paper applies the methodology to housing improvements and purchases of large consumer durables among 1,672 households who gained access to microfinance at different times in Guatemala, India and Ghana. Study findings include:

  • Probability of a major housing improvement almost doubles from 0.038 to 0.070 in the years subsequent to a household's first microfinance loan;
  • Probability of purchasing certain consumer durables increases modestly after a household gets its first microfinance loan.

About this Publication

By McIntosh, C., Villaran, G. & Wydick, B.
Published