This paper introduces a liquidity constraint in reference-dependent models for wealth and intertemporal choice. For people without access to credit, reference-dependence can increase savings, even when it would decrease savings in the absence of a liquidity constraint
Author's abstract below: We estimate the impact of Malawi's Farm Input Subsidy Program using an economy-wide approach. This approach yields benefit-cost ratios about 60% higher than existing partial equilibrium studies, a result of our accounting for…