When I
reviewed Dean Karlan and Jonathan Zinman's randomized study of the impacts of microcredit in Manila, I noted that the people in the study had household incomes averaging $15,000 and more education than the average American. Turns out that income figure is wrong.Dean wrote to me last night that in computing household income, they had counted business profits but forgotten to subtract business expenses. Mistakes like these happen all the time in complex number crunching, just as computer programs always have bugs. They are easy to make, and sound dumb once found and described. This is one reason to circulate working papers, which expose initial findings to scrutiny, as Dean and Jonathan have done.According to the
new figures, households in the study had incomes averaging 5,301 pesos/month/household member. At an exchange rate of 50 pesos/dollar, that's $106/month/person, or about $3.50/day. This still puts the Manila borrowers far above the
official Philippines poverty line of about 1,000 pesos/month/person, and well above the Hyderabad slumdwellers in the
other major randomized study of microcredit, who earned about $20/month/person. But it does make the Karlan and Zinman study more relevant than I had thought to the question of how microcredit affects the poor.
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