Microcredit and adjustment to environmental shock: Evidence from the Great Famine in Ireland

Abstract

The Great Famine of Ireland from 1845 to 51 ranks as one of the most lethal of all time, claiming approximately one eighth of the country's population. Utilizing Famine Relief Commission reports to develop a micro-level dataset of blight severity, I find that in the short run, districts more severely infected by blight experienced larger population declines and accumulations of buffer livestock by small- to medium-sized farms. In the medium and long runs, however, worse affected districts experienced greater substitutions toward other tillage crops and grazing livestock, particularly by small- to medium-sized farms. Using annual reports of the Irish Loan Funds, I further find that access to microfinance credit was an important factor in non-demographic adjustment to blight. Worse affected districts with at least one microfinance fund during the famine experienced substantially smaller relative population declines and larger relative increases in buffer livestock during and immediately after the famine, and greater relative medium- and long-run substitutions toward other crops and grazing livestock, than worse affected districts without a fund.