Bank Branch Expansion and Poverty Reduction--A Critique

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I point out several flaws in the recent study by Robin Burgess and Rohini Pande (AER 2005) linking the bank branch expansion to poverty reduction in India during 1977-90.  The authors miss some critical details of the policy and, more importantly, fail to recognize that it was the credit policy and anti-poverty programs that drove the branch expansion rather than the adoption of a specific branch expansion rule.  These facts greatly undermines the identification strategy of the authors while giving rise to the omitted variables problem.