UC San Diego

A fundamental concern in development economics is the presence of institutional and labor market failures that interact with frictions in financial markets, which may prevent economic growth. This dissertation studies the importance of these interactions in a series of three papers. Chapter 1 studies the extent to which by allowing grassroots organizations--as opposed to banks--to allocate publicly-funded credit, it is possible to overcome existing financial frictions and deliver resources the community members who need it the most: poor, high-productivity households. Using a long panel dataset I find evidence of misallocation: credit was provided to households with poor credit history, which were richer and less productive than non-borrowers. Instead, resources were delivered to households with connections to local political leaders. The results highlight the limitation of community-based approaches to allocating public resources in developing countries. Chapter 2 shows that a cash-transfer program targeted to children in Bolivian public schools boosted employment among mothers of beneficiary children by providing extra-liquidity in a context of fixed costs to work. Chapter 3 exploits rich data from Thailand to show that estimates of total factor productivity can be used to predict business success in the aftermath of credit-expansion programs.