Consumer Surplus with Incomplete Markets
The household welfare gains from financial inclusion are empirically elusive. This paper establishes that household welfare gains from a financial technology are equal to the area under dynamically compensated demand in a household model with incomplete financial markets, and general technology, preferences, and choice sets. This paper then estimates compensated demand for financial technologies leveraging three randomized control trials that introduce experimental variation in interest rates. Welfare gains per dollar lent or saved are small as compensated demand elasticities are large, but still correspond to large aggregate welfare gains from financial inclusion.
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2023-07-10
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| Subjects: | CONSUMER SURPLUS, INCOMPLETE FINANCIAL MARKETS, FINANCIAL INCLUSION, HOUSEHOLD WELFARE GAINS, |
| Online Access: | http://documents.worldbank.org/curated/en/099514406122325309/IDU0e4d509a20cf4d04ae60bfdb029f69de6bc00 https://openknowledge.worldbank.org/handle/10986/39966 |
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| Summary: | The household welfare gains from
financial inclusion are empirically elusive. This paper
establishes that household welfare gains from a financial
technology are equal to the area under dynamically
compensated demand in a household model with incomplete
financial markets, and general technology, preferences, and
choice sets. This paper then estimates compensated demand
for financial technologies leveraging three randomized
control trials that introduce experimental variation in
interest rates. Welfare gains per dollar lent or saved are
small as compensated demand elasticities are large, but
still correspond to large aggregate welfare gains from
financial inclusion. |
|---|