Do rural banks matter that much? Burgess and Pande (2005) reconsidered

Abstract

We replicate Burgess and Pande's (2005) analysis of the effect of India's state-led bank expansion on poverty. The authors instrument rural bank branch expansion by its trend reversal explained by the 1977 licensing rule and find that the bank expansion decreased poverty.

However, the authors do not consider other licensing rule amendments and concurrent policies. Thus, their instrument is not necessarily exogenous to poverty.

We show that the significant effect of bank expansion on poverty disappears after summarizing the trend reversal with more breaks linked to the bank licensing policy. (C) 2022 John Wiley & Sons, Ltd.

Keywords

• access to finance
• finance and development
• rural poverty