The Impact of Microcredit on the Poor in Bangladesh: Revisiting the Evidence - Working Paper 174 (June 2013 revision)

Forthcoming in the Journal of Development Studies.

Abstract

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:

Data sets

• Roodman & Morduch HH 2.zip—Stata file with one observation per household and survey round
• Roodman & Morduch ind 2.zip—Stata file with one observation per individual and survey round
• variable list.xls and variable list.pdf—describe the variables in these data sets
• 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
• Pitt data set 2011.zip—Stata data set posted by Mark Pitt in 2011
• 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
• PK reproduction 2 routines.do—core routines for data preparation and estimation, called by next two files
• PK reproduction 2.do—all tables in the revised working paper
• PK bimodality.do— Figures 3–5 of revised working paper
• Simulation of PK estimator inconsistency.do—appendix table
• User-written Stata commands (cmp, ghk2, ivreg2, and outreg2)

Related documents

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.

• A point-by-point reply to Pitt's 2011 critique of the 2009 version of this paper.
• The 2009 version.
• A complete copy of Morduch's 1998 paper, "Does Microfinance Really Help the Poor: New Evidence from Flagship Programs in Bangladesh."

Files needed to generate the results in the 2009 version of the paper:

Primary data not available at the World Bank site, obtained from Mark Pitt in the late 1990s

• CPIYEAR.DTA—Stata file with Consumer Price Indexes by month and region of Bangladesh
• LANDREL1.DTA—Details of relatives’ landholdings
• WGHT123.DTA—Sampling weights

Data sets

• Roodman & Morduch HH.zip—Stata file with one observation per household and survey round
• Roodman & Morduch ind.zip—Stata file with one observation per individual and survey round
• variable list.xls and variable list.pdf—describe the variables in these data sets
• 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
• Pitt data set.xls—Data set provided by Mark Pitt

Stata .do files

• Compare R&M to Pitt.do—correlations in Table 1
• RDD.do—Figures 1, 2, and 8 and fuzzy RDD regressions reported in text
• Borrowing-consumption lowess regressions.do—Figures 3-7
• PK 98 reproduction.do—replication of Pitt and Khandker 1998
• Estimate from Pitt data set.do—checks reported in text
• M 98 reproduction.do—replication of Morduch 1998
• K 05 reproduction.do—replication of Khandker 2005
• cmp on Pitt simulated data set.do—Table 11, appendix