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The Impact of Micro-Credit on Employment: Evidence from Bangladesh and Pakistan

Author

Listed:
  • Kahn, Azhar

    (University of Strathclyde)

  • Rahman, Twyeafur

    (University of Strathclyde)

  • Wright, Robert E.

    (University of Glasgow)

Abstract

This paper examines the impact of micro-credit on employment. Household-level data was collected, following a quasi-experimental design, in Bangladesh and Pakistan. Three borrower groups are compared: Current borrowers; Pipeline borrowers and Non-borrowers. Pipeline borrowers are included to control for self-selection effects. It is argued that micro-credit causes a substitution of employment away from employment-for-pay to self-employment. Therefore, the effect on total employment is ambiguous. OLS and fixed effects regression are used to examine separately self-employment and employment-for-pay between three groups of borrowers. For Pakistan, there is no evidence that micro-credit effects employment. However, for Bangladesh, there is robust evidence consistent with this hypothesis.

Suggested Citation

  • Kahn, Azhar & Rahman, Twyeafur & Wright, Robert E., 2016. "The Impact of Micro-Credit on Employment: Evidence from Bangladesh and Pakistan," IZA Discussion Papers 10046, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10046
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    Cited by:

    1. Bairagya, Indrajit & Bhattacharya, Tulika & Bhattacharjee, Manojit, 2020. "Impact of Credit Accessibility on the Earnings of Self-employed Businesses in India," Journal of Asian Economics, Elsevier, vol. 69(C).

    More about this item

    Keywords

    micro-credit; poverty; self-employment;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • I39 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Other

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