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Credit access, human capital and class structure mobility

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  • W. Bruce Wydick

Abstract

This article examines the impact of microenterprise credit programmes on class structure mobility in developing countries. It develops a model that endogenously generates an eight-fold class structure. Class membership is determined by optimal choice of labour activity, which is a function of access to credit and human capital endowments. Predictions from the model suggest that better access to credit will foster upward class mobility among self-employed entrepreneurs, and that this upward class mobility will be accentuated among entrepreneurs with high levels of human capital. Theoretical predictions from the model are compared with data on class structure mobility collected first-hand in western Guatemala. Empirical results show that upward class structure mobility increases substantially with access to credit, and also suggest that the combined effect of innate entrepreneurial ability and credit access has a greater impact on upward class structure mobility than the interaction between formal schooling and credit access.

Suggested Citation

  • W. Bruce Wydick, 1999. "Credit access, human capital and class structure mobility," Journal of Development Studies, Taylor & Francis Journals, vol. 35(6), pages 131-152.
  • Handle: RePEc:taf:jdevst:v:35:y:1999:i:6:p:131-152 DOI: 10.1080/00220389908422605
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    Cited by:

    1. Beck, Thorsten & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2007. "Reaching out: Access to and use of banking services across countries," Journal of Financial Economics, Elsevier, vol. 85(1), pages 234-266, July.
    2. Rizov, Marian, 2003. "Human Capital And The Agrarian Structure In Transition: Micro Evidence From Romania," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25823, International Association of Agricultural Economists.
    3. Asli Demirgüç-Kunt & Ross Levine, 2009. "Finance and Inequality: Theory and Evidence," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 287-318, November.
    4. C. Kirabo Jackson & Henry S. Schneider, 2011. "Do Social Connections Reduce Moral Hazard? Evidence from the New York City Taxi Industry," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 244-267, July.
    5. João Pedro W. de Azevedo, 2004. "Entrepreneurship And Liquidity Constraints In Deprived Areas: Evidence From The Slums Of Rio De Janeiro," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 135, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Beck, Erin, 2016. "Repopulating Development: An Agent-Based Approach to Studying Development Interventions," World Development, Elsevier, vol. 80(C), pages 19-32.
    7. Rizov, Marian, 2002. "Agricultural Production Organization in Transition Economies and the Role of Human Capital: Evidence from Romania," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24925, European Association of Agricultural Economists.
    8. Rizov, Marian & Swinnen, Johan F.M., 2004. "Human capital, market imperfections, and labor reallocation in transition," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 745-774, December.

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