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Forthcoming in the Journal of Development Studies.
We replicate and reanalyze the most influential study of microcredit impacts (Pitt and Khandker, 1998). That study was celebrated for showing that microcredit reduces poverty, a much hoped-for possibility (though one not confirmed by recent randomized controlled trials). We show that the original results on poverty reduction disappear after dropping outliers, or when using a robust linear estimator. Using a new program for estimation of mixed process maximum likelihood models, we show how assumptions critical for the original analysis, such as error normality, are contradicted by the data. We conclude that questions about impact cannot be answered in these data.
Files needed to generate the results in the 2013 revision of the paper:
PK SQL.zip—Microsoft SQL Server database that transforms the primary survey data into the Stata data sets. Also contains Morduch’s (1998) data set, and a partial data set obtained from Mark Pitt in 2008. Requires SQL Server (free version) to view
PK 98 results 3.xls—Spreadsheet to transform raw regression result files into displayed tables. If prompted by Excel, data connections (embedded in last two tabs, to regression output files) can be left disabled.
Stata .do files
RDD 2.do—Figure 1 in response to Pitt and Figures 1–2 in revised working paper
The first version of this paper, released in 2009, attempted to replicate three studies done using the same data from Bangladesh. In 2011, Mark Pitt identified two important discrepancies in the replication of the most influential of the three, the one by Pitt and Khandker. The 2011 version incorporates Pitt's corrections, gains a deeper understanding of the original paper's statistical problems, and, because of the complexity of the analysis, focuses just on it.
RM db.zip—Microsoft SQL Server database that transforms the primary survey data into the Stata data sets. Also contains Morduch’s (1998) data set, and a partial data set obtained from Mark Pitt in 2008. Requires SQL Server (free version) to view