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Microcredit, Labor, and Poverty Impacts in Urban Mexico

  • Miguel Niño-Zarazúa

Improved household accessibility to credit is identified as a significant determinant of intra-household re-allocation of labour resources with important implications for productivity, income, and poverty status. However, credit accessibility could also have wider impacts on poverty if it leads to new hires outside the household. This paper contributes to the existing literature on microcredit in two important ways: first, it investigates the routes through which microcredit reaches those in poverty outside the household. We test whether, by lending to the vulnerable non-poor, microcredit programmes can indirectly benefit poor labourers through increased employment. Second, we conduct the study in the spatial dimension of urban poverty Mexico. This is relevant when considering that, unlike in rural areas, labour often represents the only source of livelihoods to the extreme poor. Our findings point to significant trickle-down effects of microcredit that benefit poor labourers; however, these effects are only observed after loan-supported enterprising households achieve earnings well above the poverty line. The paper concludes with reflections on the policy implications.

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File URL: http://hdl.handle.net/10.1111/rode.12063
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Article provided by Wiley Blackwell in its journal Review of Development Economics.

Volume (Year): 17 (2013)
Issue (Month): 4 (November)
Pages: 747-762

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Handle: RePEc:bla:rdevec:v:17:y:2013:i:4:p:747-762
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  1. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Mark Rosenzweig & Andrew D. Foster, . "Comparative Advantage, Information and the Allocation of Workers to Tasks: Evidence from an Agricultural Labor Market," Home Pages _066, University of Pennsylvania.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  4. Pitt, M.M. & Khandker, S.R., 1996. "Household and Intrahousehold Impact of the Grameen Bank and Similar Targeted Credit Programs in Bangladesh," World Bank - Discussion Papers 320, World Bank.
  5. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
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