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Child Labour and Schooling Responses to Access to Microcredit in Rural Bangladesh

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Author Info
Islam, Asadul
Choe, Chongwoo

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Abstract

Microcredit has been shown to be effective in reducing poverty in many developing countries. However, less is known about its effect on human capital formation. In this paper, we develop a model examining the relation between microcredit and child labour. We then empirically examine the impact of access to microcredit on children’s education and child labour using a new and large data set from rural Bangladesh. We address the selection bias using the instrumental variable method where the instrument relies on an exogenous variation in treatment intensity among households in different villages. The results show that household participation in a microcredit program may increase child labour and reduce school enrolment. The adverse effects are more pronounced for girls than boys. Younger children are more adversely affected than their older siblings and the children of poorer and less educated households are affected most adversely. Our findings remain robust to different specifications and methods, and when corrected for various sources of selection bias.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16842.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:16842

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Related research
Keywords: Microcredit; child labour; school enrolment; instrumental variable; treatment effect;

Find related papers by JEL classification:
A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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