Pub Date : 2025-05-01DOI: 10.1016/j.jpolmod.2025.02.001
Knut L. Seip , Dan Zhang
The study compares the recessions in 2008 and the recession in 2020 using the Taylor rule, Okun’s law and the Phillips curve. We propose measures to forecast recessions and guide policy responses to mitigate their impact: i) Sharp “spikes” in the 21-month moving average of Okun’s law and Phillips curve variables indicate that shifts in their lead-lag relations could serve as early warning signals for impending recessions; ii) A more balanced increase in monetary supply could potentially shorten recession durations without accelerating inflation during the post-recession recovery; iii) deviations from the Taylor rule did not worsen the economy.
{"title":"A tale of the two recessions 2008 and 2020: What do the Taylor rule, the Phillips curve and Okun's law tell?","authors":"Knut L. Seip , Dan Zhang","doi":"10.1016/j.jpolmod.2025.02.001","DOIUrl":"10.1016/j.jpolmod.2025.02.001","url":null,"abstract":"<div><div>The study compares the recessions in 2008 and the recession in 2020 using the Taylor rule, Okun’s law and the Phillips curve. We propose measures to forecast recessions and guide policy responses to mitigate their impact: i) Sharp “spikes” in the 21-month moving average of Okun’s law and Phillips curve variables indicate that shifts in their lead-lag relations could serve as early warning signals for impending recessions; ii) A more balanced increase in monetary supply could potentially shorten recession durations without accelerating inflation during the post-recession recovery; iii) deviations from the Taylor rule did not worsen the economy.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 3","pages":"Pages 681-701"},"PeriodicalIF":3.5,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144255413","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-05-01DOI: 10.1016/j.jpolmod.2024.06.005
Made Adi Widyatmika, Nomesh B. Bolia
The responsibility of the garbage collector officer towards the environment largely determines the reliability of the waste management system. The study develops a policy framework for a waste management system using an SEM approach to the environmental responsibility of a garbage collector officer. From a case study in Indonesia, a survey of 246 formal waste collectors in Denpasar’s waste management system assessed their opinion of the internal service quality. The analysis determines the impact of internal service quality elements on job satisfaction and environmental responsibility. Model-fit statistics confirm the validity and reliability of the model and indicate that tangibility, reliability, assurance, and empathy positively affect job satisfaction. Meanwhile, management responsiveness does not have a statistically significant effect. The study suggests that waste management should acknowledge the indirect influence of internal service quality on the environmental responsibility of waste collectors through job satisfaction factors.
垃圾收集员对环境的责任在很大程度上决定了垃圾管理系统的可靠性。本研究采用 SEM 方法，针对垃圾收集员的环境责任，制定了垃圾管理系统的政策框架。通过对印度尼西亚登巴萨（Denpasar）垃圾管理系统中 246 名正式垃圾收集员的案例研究，调查评估了他们对内部服务质量的看法。分析确定了内部服务质量要素对工作满意度和环境责任感的影响。模型拟合统计证实了模型的有效性和可靠性，并表明有形性、可靠性、保证性和同理心会对工作满意度产生积极影响。同时，管理响应性在统计上没有显著影响。研究表明，废物管理部门应认识到内部服务质量通过工作满意度因素对废物收集者环境责任的间接影响。
{"title":"Improving waste collectors' environmental responsibilities in Indonesia: A policy framework","authors":"Made Adi Widyatmika, Nomesh B. Bolia","doi":"10.1016/j.jpolmod.2024.06.005","DOIUrl":"10.1016/j.jpolmod.2024.06.005","url":null,"abstract":"<div><div>The responsibility of the garbage collector officer towards the environment largely determines the reliability of the waste management<span> system. The study develops a policy framework for a waste management system using an SEM approach to the environmental responsibility of a garbage collector officer. From a case study in Indonesia, a survey of 246 formal waste collectors in Denpasar’s waste management system assessed their opinion of the internal service quality. The analysis determines the impact of internal service quality elements on job satisfaction and environmental responsibility. Model-fit statistics confirm the validity and reliability of the model and indicate that tangibility, reliability, assurance, and empathy positively affect job satisfaction. Meanwhile, management responsiveness does not have a statistically significant effect. The study suggests that waste management should acknowledge the indirect influence of internal service quality on the environmental responsibility of waste collectors through job satisfaction factors.</span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 3","pages":"Pages 537-550"},"PeriodicalIF":3.5,"publicationDate":"2025-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141553082","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.jpolmod.2024.10.001
Maite Blázquez Cuesta, Marco A. Pérez Navarro, Rocío Sánchez-Mangas
This paper analyzes a relevant issue for education and labor policymakers, overeducation in the early careers of university graduates. Using Spanish data, we investigate the role played by the business cycle and field of study and their interaction in shaping both the incidence and persistence of overeducation. We also analyze the relevance of specific types of knowledge and skills as driving factors in reducing overeducation risk. Our data come from the Survey on the Labor Insertion of University Graduates (EILU) conducted by the Spanish National Statistics Institute in 2014 and 2019. The survey collects rich information on cohorts that graduated in 2019 and 2014, during the Great Recession and the subsequent economic recovery, respectively. Our results show, first, the relevance of the economic scenario when graduates enter the labor market. Graduation during a recession increases overeducation risk and persistence. Second, a clear heterogeneous pattern is observed across fields of study, with health sciences graduates displaying better performance in terms of both overeducation incidence and persistence and less impact of the business cycle. Third, we find evidence that some transversal skills can help to reduce overeducation risk in the absence of specific knowledge required for the job, thus indicating some kind of compensatory role. Our findings have important policy implications. Overeducation, and more importantly overeducation persistence, imply a non-neglectable misallocation of resources, with serious consequences not only for the affected individuals but for the society as a whole. Therefore, policymakers need to address this issue in the design of education and labor market policies, seeking to ensure that the competencies acquired at university provide graduates with a better fit in the labor market.
{"title":"Overeducation under different macroeconomic conditions: How Spanish university graduates fit in the labor market?","authors":"Maite Blázquez Cuesta, Marco A. Pérez Navarro, Rocío Sánchez-Mangas","doi":"10.1016/j.jpolmod.2024.10.001","DOIUrl":"10.1016/j.jpolmod.2024.10.001","url":null,"abstract":"<div><div>This paper analyzes a relevant issue for education and labor policymakers, overeducation in the early careers of university graduates. Using Spanish data, we investigate the role played by the business cycle and field of study and their interaction in shaping both the incidence and persistence of overeducation. We also analyze the relevance of specific types of knowledge and skills as driving factors in reducing overeducation risk. Our data come from the Survey on the Labor Insertion of University Graduates (EILU) conducted by the Spanish National Statistics Institute in 2014 and 2019. The survey collects rich information on cohorts that graduated in 2019 and 2014, during the Great Recession and the subsequent economic recovery, respectively. Our results show, first, the relevance of the economic scenario when graduates enter the labor market. Graduation during a recession increases overeducation risk and persistence. Second, a clear heterogeneous pattern is observed across fields of study, with health sciences graduates displaying better performance in terms of both overeducation incidence and persistence and less impact of the business cycle. Third, we find evidence that some transversal skills can help to reduce overeducation risk in the absence of specific knowledge required for the job, thus indicating some kind of compensatory role. Our findings have important policy implications. Overeducation, and more importantly overeducation persistence, imply a non-neglectable misallocation of resources, with serious consequences not only for the affected individuals but for the society as a whole. Therefore, policymakers need to address this issue in the design of education and labor market policies, seeking to ensure that the competencies acquired at university provide graduates with a better fit in the labor market.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 448-470"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144138892","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article empirically investigates the relationship between education expenditures and economic growth. The study focuses on European countries with different models of state intervention, i.e. Germany, France, Greece, Italy, Spain, and Portugal, for the period 1996–2019, employing econometric techniques, such as adaptive LASSO and 3SLS model. The study finds that education expenditure significantly influences GDP per capita identifying the R&D expenditures as the main channel through which education expenditures influence economic growth. The findings are consistent throughout the sample. Also, we extend the existing literature, as the first research to empirically identify R&D expenditures as the key channel, leading to useful insights for policy makers, regarding economic growth. Specifically, it indicates that strategic funding allocation in education, particularly paired with R&D, should boost economic growth and resilience. This positive outcome leads to optimized allocation of public expenditures for innovation and competitiveness.
{"title":"Education Expenditures and Growth: Is R&D the link?","authors":"Danai Diakodimitriou , Alexandros Tsioutsios , Theofanis Papageorgiou","doi":"10.1016/j.jpolmod.2025.01.003","DOIUrl":"10.1016/j.jpolmod.2025.01.003","url":null,"abstract":"<div><div>This article empirically investigates the relationship between education expenditures and economic growth. The study focuses on European countries with different models of state intervention, i.e. Germany, France, Greece, Italy, Spain, and Portugal, for the period 1996–2019, employing econometric techniques, such as adaptive LASSO and 3SLS model. The study finds that education expenditure significantly influences GDP per capita identifying the R&D expenditures as the main channel through which education expenditures influence economic growth. The findings are consistent throughout the sample. Also, we extend the existing literature, as the first research to empirically identify R&D expenditures as the key channel, leading to useful insights for policy makers, regarding economic growth. Specifically, it indicates that strategic funding allocation in education, particularly paired with R&D, should boost economic growth and resilience. This positive outcome leads to optimized allocation of public expenditures for innovation and competitiveness.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 322-337"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144139007","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.jpolmod.2025.01.005
Petar Stankov
Literature on optimal lockdowns is abundant. However, when are lockdowns politically optimal? Specifically, is there a level of restrictions that a majority will be ready to tolerate, thereby minimising political conflict over optimal policy choices? The answers emerge from an extended voter preferences framework, where citizens living in a pandemic choose their vaccination status, and some are vaccine-hesitant. The model demonstrates that a society will be ready to tolerate harder restrictions when citizens are more productive or their vaccine salience is higher. However, the productivity and vaccine salience effects are mitigated by the government’s capacity for fiscal transfers. Similar to other political economy models of intra-pandemic societies, zero restrictions emerge as politically optimal in societies with sufficiently high vaccine hesitancy or low productivity. Canton-level evidence from the 2021 Swiss referendum on expanding COVID-19 restrictions offers strong support for the theory. A discussion of policy implications completes the analysis.
{"title":"Politically optimal lockdowns with vaccine hesitancy: Theory and evidence from Switzerland","authors":"Petar Stankov","doi":"10.1016/j.jpolmod.2025.01.005","DOIUrl":"10.1016/j.jpolmod.2025.01.005","url":null,"abstract":"<div><div>Literature on optimal lockdowns is abundant. However, when are lockdowns <em>politically</em> optimal? Specifically, is there a level of restrictions that a majority will be ready to tolerate, thereby minimising political conflict over optimal policy choices? The answers emerge from an extended voter preferences framework, where citizens living in a pandemic choose their vaccination status, and some are vaccine-hesitant. The model demonstrates that a society will be ready to tolerate harder restrictions when citizens are more productive or their vaccine salience is higher. However, the productivity and vaccine salience effects are mitigated by the government’s capacity for fiscal transfers. Similar to other political economy models of intra-pandemic societies, zero restrictions emerge as politically optimal in societies with sufficiently high vaccine hesitancy or low productivity. Canton-level evidence from the 2021 Swiss referendum on expanding COVID-19 restrictions offers strong support for the theory. A discussion of policy implications completes the analysis.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 358-370"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144139009","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.jpolmod.2025.02.002
Pablo A. Garcia-Fuentes , P. Lynn Kennedy , William R. Ash
This paper assesses the impacts of remittances on poverty for 130 developing countries for the period 1990–2019. It finds that remittances decrease poverty through their direct effect and increase human capital which enhances the total effects of remittances on poverty. A 10 % increase in per capita remittances decreases the poverty level by 1.3 %, poverty depth by 2 %, and poverty severity by 3.12 %. In addition, human capital decreases poverty level, depth, and severity. This supports the notion that developing countries should adopt policies that lower remittance costs and promote education to increase the impacts of remittances on poverty.
{"title":"The multiple impact of remittances on poverty in developing countries: Direct effects and through human capital","authors":"Pablo A. Garcia-Fuentes , P. Lynn Kennedy , William R. Ash","doi":"10.1016/j.jpolmod.2025.02.002","DOIUrl":"10.1016/j.jpolmod.2025.02.002","url":null,"abstract":"<div><div>This paper assesses the impacts of remittances on poverty for 130 developing countries for the period 1990–2019. It finds that remittances decrease poverty through their direct effect and increase human capital which enhances the total effects of remittances on poverty. A 10 % increase in per capita remittances decreases the poverty level by 1.3 %, poverty depth by 2 %, and poverty severity by 3.12 %. In addition, human capital decreases poverty level, depth, and severity. This supports the notion that developing countries should adopt policies that lower remittance costs and promote education to increase the impacts of remittances on poverty.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 428-447"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144138891","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.jpolmod.2025.01.002
M'pya Banza M , Mumbere Lubula E , Kamala Kaghoma C
This paper investigates the effectiveness of fiscal policy in the Democratic Republic of Congo (DRC), focusing on its impact on GDP, aggregate demand, private consumption, and investment. Employing a medium-scale dynamic stochastic general equilibrium (DSGE) model with Bayesian estimation, the study accounts for the distinct dynamics of Ricardian and non-Ricardian households within the DRC’s socio-economic context. The results indicate that public investment expenditures significantly enhance GDP and household consumption, while current expenditures often fail to stimulate aggregate demand due to corruption and inefficiencies. Conversely, tax reductions are shown to positively influence macroeconomic variables, underlining their importance in fiscal policy design. The findings highlight the critical role of well-targeted fiscal strategies in promoting economic stability and growth in developing economies. Policy recommendations emphasize prioritizing public investment, implementing tax reforms during economic downturns, and addressing systemic corruption to maximize fiscal policy’s macroeconomic impact.
{"title":"The effectiveness of fiscal policy in DR Congo: Spending and taxing for macroeconomic impact","authors":"M'pya Banza M , Mumbere Lubula E , Kamala Kaghoma C","doi":"10.1016/j.jpolmod.2025.01.002","DOIUrl":"10.1016/j.jpolmod.2025.01.002","url":null,"abstract":"<div><div>This paper investigates the effectiveness of fiscal policy in the Democratic Republic of Congo (DRC), focusing on its impact on GDP, aggregate demand, private consumption, and investment. Employing a medium-scale dynamic stochastic general equilibrium (DSGE) model with Bayesian estimation, the study accounts for the distinct dynamics of Ricardian and non-Ricardian households within the DRC’s socio-economic context. The results indicate that public investment expenditures significantly enhance GDP and household consumption, while current expenditures often fail to stimulate aggregate demand due to corruption and inefficiencies. Conversely, tax reductions are shown to positively influence macroeconomic variables, underlining their importance in fiscal policy design. The findings highlight the critical role of well-targeted fiscal strategies in promoting economic stability and growth in developing economies. Policy recommendations emphasize prioritizing public investment, implementing tax reforms during economic downturns, and addressing systemic corruption to maximize fiscal policy’s macroeconomic impact.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 298-321"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144139006","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.jpolmod.2025.01.004
Markus Tiemann
As an outcome of the 2024 European elections, right-wing political parties have gained significant shares of votes in some EU member states, which has led to solidified right-wing representation in the European Parliament. This paper assesses the impact of the right-wing electoral behaviour on the stock price of European banks and uses event study methodology to produce evidence which suggests that right-wing political success tends to drive negative abnormal stock returns on the days succeeding the EU elections. As such, the paper delivers argumentation that right-wing political success impacts European financial stability and therefore also to the European investment environment.
{"title":"Right-wing election success and European Banks: Evidence from the 2024 European Elections","authors":"Markus Tiemann","doi":"10.1016/j.jpolmod.2025.01.004","DOIUrl":"10.1016/j.jpolmod.2025.01.004","url":null,"abstract":"<div><div>As an outcome of the 2024 European elections, right-wing political parties have gained significant shares of votes in some EU member states, which has led to solidified right-wing representation in the European Parliament. This paper assesses the impact of the right-wing electoral behaviour on the stock price of European banks and uses event study methodology to produce evidence which suggests that right-wing political success tends to drive negative abnormal stock returns on the days succeeding the EU elections. As such, the paper delivers argumentation that right-wing political success impacts European financial stability and therefore also to the European investment environment.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 338-357"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144139008","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.jpolmod.2024.06.006
Andrea Bonfatti , Elena Giarda
Between July 2021 and March 2023, the Italian government took action to support households’ and individuals’ incomes to help them cope with the exceptional energy and food prices surge, by means of both tariff and income-based fiscal policy measures. In this paper, we perform a microsimulation exercise to quantify the effects of the price increases and of the policy interventions on household expenditure and income. Our results indicate that the regressive impact of the price rises was mitigated by the fiscal measures, which also succeeded in reducing inequality, at risk of poverty and energy poverty. Furthermore, we observe the relevant role of income-based measures in the South of the country.
{"title":"Energy price increases and mitigation policies: Redistributive effects on Italian households","authors":"Andrea Bonfatti , Elena Giarda","doi":"10.1016/j.jpolmod.2024.06.006","DOIUrl":"10.1016/j.jpolmod.2024.06.006","url":null,"abstract":"<div><div>Between July 2021 and March 2023, the Italian government took action to support households’ and individuals’ incomes to help them cope with the exceptional energy and food prices surge, by means of both tariff and income-based fiscal policy measures. In this paper, we perform a microsimulation exercise to quantify the effects of the price increases and of the policy interventions on household expenditure<span> and income. Our results indicate that the regressive impact of the price rises was mitigated by the fiscal measures, which also succeeded in reducing inequality, at risk of poverty and energy poverty. Furthermore, we observe the relevant role of income-based measures in the South of the country.</span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 251-275"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141609572","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-03-01DOI: 10.1016/j.jpolmod.2024.05.006
Disha Bhanot , Vivek Farias , Deeksha Sinha
Interest subsidies on crop loans are a common feature of rural credit markets in developing countries. The objective behind giving interest subsidies is two-fold – increasing access to credit and improving loan repayment rates, and is therefore regarded as a win-win for the borrower and the lender. This study focusses on a policy intervention that provides interest subsidy for crop loans availed under the Kisan Credit Card (KCC) scheme - India's flagship program to provide short-term agricultural credit for farmers. Using a unique dataset from a large public sector bank in India, we evaluate the causal impact of this intervention on both credit access and loan repayment behavior. We also capture the heterogeneous impact of the policy on new and existing borrowers. The results of econometric analysis - a combination of matching and difference-in-difference techniques - show a substantial increase (35%) in new loans, in addition to 20% decrease in the overall loan amount, indicating increased breadth and depth of access. However, contrary to standard economic theories, we observe a reduction in odds of repayment. Further, we find that the interest rate subsidy worsens the repayment rates of existing borrowers too. Our findings underscore the importance of various operational and behavioral aspects of the agricultural lending ecosystem to design win-win credit policies.
{"title":"Interest subvention for crop loans in India: Win-win or win-lose ?","authors":"Disha Bhanot , Vivek Farias , Deeksha Sinha","doi":"10.1016/j.jpolmod.2024.05.006","DOIUrl":"10.1016/j.jpolmod.2024.05.006","url":null,"abstract":"<div><div><span>Interest subsidies on crop loans are a common feature of rural credit markets in developing countries. The objective behind giving interest subsidies is two-fold – increasing access to credit and improving loan repayment<span> rates, and is therefore regarded as a win-win for the borrower and the lender. This study focusses on a policy intervention that provides interest subsidy for crop loans availed under the Kisan Credit Card (KCC) scheme - India's flagship program to provide short-term agricultural credit for farmers. Using a unique dataset from a large public sector bank in India, we evaluate the causal impact of this intervention on both credit access and loan repayment behavior. We also capture the heterogeneous impact of the policy on new and existing borrowers. The results of econometric analysis - a combination of matching and difference-in-difference techniques - show a substantial increase (35%) in new loans, in addition to 20% decrease in the overall loan amount, indicating increased breadth and depth of access. However, contrary to standard </span></span>economic theories<span>, we observe a reduction in odds of repayment. Further, we find that the interest rate subsidy worsens the repayment rates of existing borrowers too. Our findings underscore the importance of various operational and behavioral aspects of the agricultural lending ecosystem to design win-win credit policies.</span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 2","pages":"Pages 371-393"},"PeriodicalIF":3.5,"publicationDate":"2025-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141152982","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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