Loan Regulation and Child Labor in Rural India
AbstractWe study the impact of loan regulation in rural India on child labor with an overlapping-generations model of formal and informal lending, human capital accumulation, adverse selection, and differentiated risk types. Specifically, we build a model economy that replicates the current outcome with a loan rate cap and no lender discrimination by risk using a survey of rural lenders. Households borrow primarily from informal moneylenders and use child labor. Removing the rate cap and allowing lender discrimination markedly increases capital use, eliminates child labor, and improves welfare of all household types.
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Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 70_12.
Date of creation: Nov 2012
Date of revision:
child labor; India; informal lending; lending discrimination; interest rate caps;
Other versions of this item:
- Basab Dasgupta & Christian Zimmermann, 2012. "Loan regulation and child labor in rural India," Working Papers 2012-027, Federal Reserve Bank of St. Louis.
- Dasgupta, Basab & Zimmermann, Christian, 2012. "Loan Regulation and Child Labor in Rural India," IZA Discussion Papers 6979, Institute for the Study of Labor (IZA).
- Basab Dasgupta & Christian Zimmermann, 2012. "Loan Regulation and Child Labor in Rural India," CESifo Working Paper Series 3992, CESifo Group Munich.
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
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