IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/16842.html
   My bibliography  Save this paper

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

Author

Listed:
  • Islam, Asadul
  • Choe, Chongwoo

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.

Suggested Citation

  • Islam, Asadul & Choe, Chongwoo, 2009. "Child Labour and Schooling Responses to Access to Microcredit in Rural Bangladesh," MPRA Paper 16842, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:16842
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/16842/1/MPRA_paper_16842.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(3), pages 311-335.
    2. Hazarika, Gautam & Sarangi, Sudipta, 2008. "Household Access to Microcredit and Child Work in Rural Malawi," World Development, Elsevier, vol. 36(5), pages 843-859, May.
    3. Jere R. Behrman & Mark R. Rosenzweig, 2002. "Does Increasing Women's Schooling Raise the Schooling of the Next Generation?," American Economic Review, American Economic Association, vol. 92(1), pages 323-334, March.
    4. Matthias Doepke & Fabrizio Zilibotti, 2005. "The Macroeconomics of Child Labor Regulation," American Economic Review, American Economic Association, vol. 95(5), pages 1492-1524, December.
    5. Jean-Marie Baland & James A. Robinson, 2000. "Is Child Labor Inefficient?," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 663-679, August.
    6. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 2-16, January.
    7. repec:pri:rpdevs:morduch_microfinance_poor is not listed on IDEAS
    8. Eric V. Edmonds, 2005. "Does Child Labor Decline with Improving Economic Status?," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
    9. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
    10. Edmonds, Eric V., 2008. "Child Labor," Handbook of Development Economics, in: T. Paul Schultz & John A. Strauss (ed.), Handbook of Development Economics, edition 1, volume 4, chapter 57, pages 3607-3709, Elsevier.
    11. Claire Salmon, 2005. "Child Labor in Bangladesh," Journal of Developing Societies, , vol. 21(1-2), pages 33-54, June.
    12. Jonathan Morduch, 1998. "Does Microfinance Really Help the Poor? New Evidence from Flagship Programs in Bangladesh," Working Papers 198, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    13. Jacoby, Hanan G, 1994. "Borrowing Constraints and Progress through School: Evidence from Peru," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 151-160, February.
    14. Dean Karlan & Jonathan Zinman, 2010. "Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts," The Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 433-464, January.
    15. Michael P. Keane & Kenneth I. Wolpin, 2002. "Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part I: Lessons from a Simulation Exercise," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 570-599.
    16. Vella, Francis, 1993. "A Simple Estimator for Simultaneous Models with Censored Endogenous Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 441-457, May.
    17. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2003. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," Econometrica, Econometric Society, vol. 71(4), pages 1161-1189, July.
    18. George Psacharopoulos & Harry Anthony Patrinos, 1997. "Family size, schooling and child labor in Peru - An empirical analysis," Journal of Population Economics, Springer;European Society for Population Economics, vol. 10(4), pages 387-405.
    19. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    20. David M. Blau, 1999. "The Effect Of Income On Child Development," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 261-276, May.
    21. Ravallion, Martin & Wodon, Quentin, 2000. "Does Child Labour Displace Schooling? Evidence on Behavioural Responses to an Enrollment Subsidy," Economic Journal, Royal Economic Society, vol. 110(462), pages 158-175, March.
    22. Behrman, Jere R & Knowles, James C, 1999. "Household Income and Child Schooling in Vietnam," The World Bank Economic Review, World Bank, vol. 13(2), pages 211-256, May.
    23. Rosenzweig, Mark R & Schultz, T Paul, 1982. "Market Opportunities, Genetic Endowments, and Intrafamily Resource Distribution: Child Survival in Rural India," American Economic Review, American Economic Association, vol. 72(4), pages 803-815, September.
    24. Joseph P. Kaboski & Robert M. Townsend, 2005. "Policies and Impact: An Analysis of Village-Level Microfinance Institutions," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 1-50, March.
    25. Mohammad Mafizur Rahman & Rasheda Khanam & Nur Uddin Absar, 1999. "Child Labor in Bangladesh: A Critical Appraisal of Harkin’s Bill and the MOU-Type Schooling Program," Journal of Economic Issues, Taylor & Francis Journals, vol. 33(4), pages 985-1003, December.
    26. Ranjan, Priya, 2001. "Credit constraints and the phenomenon of child labor," Journal of Development Economics, Elsevier, vol. 64(1), pages 81-102, February.
    27. Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
    28. Kenneth E. Train & Daniel L. McFadden & Moshe Ben-Akiva, 1987. "The Demand for Local Telephone Service: A Fully Discrete Model of Residential Calling Patterns and Service Choices," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 109-123, Spring.
    29. Shahidur R. Khandker, 2005. "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh," The World Bank Economic Review, World Bank, vol. 19(2), pages 263-286.
    30. Rajeev Dehejia & Roberta Gatti, 2002. "Child Labor: The Role of Income Variability and Access to Credit Across Countries," NBER Working Papers 9018, National Bureau of Economic Research, Inc.
    31. Dean Karlan & Jonathan Zinman, 2008. "Lying About Borrowing," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 510-521, 04-05.
    32. Wydick, Bruce, 1999. "The Effect of Microenterprise Lending on Child Schooling in Guatemala," Economic Development and Cultural Change, University of Chicago Press, vol. 47(4), pages 853-869, July.
    33. Ranjan, Priya, 1999. "An economic analysis of child labor," Economics Letters, Elsevier, vol. 64(1), pages 99-105, July.
    34. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
    35. Asadul Islam Author-X-Name-Asadul, 2008. "Who Benefits From Microfinance? The Impact Evaluation Of Large Scale Programs In Bangladesh," Monash Economics Working Papers 29/08, Monash University, Department of Economics.
    36. Edmonds, Eric V., 2006. "Child labor and schooling responses to anticipated income in South Africa," Journal of Development Economics, Elsevier, vol. 81(2), pages 386-414, December.
    37. Gordon B. Dahl & Lance Lochner, 2005. "The Impact of Family Income on Child Achievement," NBER Working Papers 11279, National Bureau of Economic Research, Inc.
    38. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
    39. Beegle, Kathleen & Dehejia, Rajeev H. & Gatti, Roberta, 2006. "Child labor and agricultural shocks," Journal of Development Economics, Elsevier, vol. 81(1), pages 80-96, October.
    40. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 27-28, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jing You & Samuel Annim, 2014. "The Impact of Microcredit on Child Education: Quasi-experimental Evidence from Rural China," Journal of Development Studies, Taylor & Francis Journals, vol. 50(7), pages 926-948, July.
    2. Ghulam Abid & Binish Khan & Zeeshan Rafiq & Alia Ahmed, 2015. "Child Trade-Off Theory: A Theoretical Discussion on the Structure, Causes, Consequences and Eradication of Child Labor," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 4(1), pages 24-34, March.
    3. Roxana Elena Manea, 2021. "School Feeding Programmes, Education and Food Security in Rural Malawi," CIES Research Paper series 63-2020, Centre for International Environmental Studies, The Graduate Institute.
    4. Olga Kondratjeva, 2021. "Borrowing channels, purposes, and household investment and consumption: evidence from Nepal," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(4), pages 1591-1613, December.
    5. Furio C. Rosati, 2022. "Can cash transfers reduce child labor?," IZA World of Labor, Institute of Labor Economics (IZA), pages 293-293, February.
    6. Islam, Asadul, 2015. "Heterogeneous effects of microcredit: Evidence from large-scale programs in Bangladesh," Journal of Asian Economics, Elsevier, vol. 37(C), pages 48-58.
    7. Oryoie, Ali Reza & Alwang, Jeffrey & Tideman, Nicolaus, 2017. "Child Labor and Household Land Holding: Theory and Empirical Evidence from Zimbabwe," World Development, Elsevier, vol. 100(C), pages 45-58.
    8. Lutfunnahar Begum & Philip J. Grossman & Asadul Islam, 2014. "Parental Attitude and Investment in Children’s Education and Health in Developing Countries," Monash Economics Working Papers 30-14, Monash University, Department of Economics.
    9. Jacobus Hoop & Patrick Premand & Furio Rosati & Renos Vakis, 2018. "Women’s economic capacity and children’s human capital accumulation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 31(2), pages 453-481, April.
    10. Bernal, Carolina & Vlaicu, Razvan, 2023. "Child Labor, Rainfall Shocks, and Financial Inclusion: Evidence from Rural Households," IDB Publications (Working Papers) 13008, Inter-American Development Bank.
    11. Thai, Pham Huu Hong, 2018. "Does household credit benefit child schooling for the poorest ethnic minorities? New evidence from a transitional economy," Children and Youth Services Review, Elsevier, vol. 89(C), pages 103-112.
    12. Charles S. Tundui & Hawa P. Tundui, 2018. "Examining the effect of child labour in the profitability of women owned enterprises: a case of microcredit supported enterprises in Tanzania," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 8(1), pages 1-16, December.
    13. Abid Hussain & Muhammad Jehangir Khan & Iftikhar Ahmad, 2016. "Impact of Credit on Education and Healthcare Spending in Rural Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 853-870.
    14. Raymond Boadi Frempong, 2023. "Do subsidies on seed and fertilizer lead to child labour? Evidence from Malawi," Development Policy Review, Overseas Development Institute, vol. 41(2), March.
    15. Enrico Nano, 2022. "Electrifying Nigeria: the Impact of Rural Access to Electricity on Kids' Schooling," IHEID Working Papers 03-2022, Economics Section, The Graduate Institute of International Studies.
    16. Bhuiya, Mohammad Monzur Morshed & Khanam, Rasheda & Rahman, Mohammad Mafizur & Nghiem, Son, 2019. "Microcredit participation and child schooling in rural Bangladesh: Evidence from a cross-sectional survey," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 293-301.
    17. Emerson, Patrick M. & McGough, Bruce, 2010. "Are Microloans Bad for Growth?," IZA Discussion Papers 5249, Institute of Labor Economics (IZA).
    18. Chongwoo Choe & Ratbek Dzhumashev & Asadul Islam & Zakir H. Khan, 2011. "Corruption and Network in Education: Evidence from the Household Survey Data in Bangladesh," Monash Economics Working Papers 08-11, Monash University, Department of Economics.
    19. Roxana Elena Manea, 2020. "School Feeding Programmes, Education and Food Security in Rural Malawi," CIES Research Paper series 63-2020, Centre for International Environmental Studies, The Graduate Institute.
    20. Phan, Chung Thanh & Sun, Sizhong & Zhou, Zhang-Yue & Beg, Rabiul & Ramsawak, Richard, 2023. "Does productive microcredit improve rural children's education? Evidence from rural Vietnam," Journal of Asian Economics, Elsevier, vol. 84(C).
    21. Dinh, Cuong & Nguyen, Cuong & Pham, Phuong, 2014. "Does Microcredit Have an Impact on Children? Evidences from Vietnam," MPRA Paper 71092, University Library of Munich, Germany.
    22. Marco Sanfilippo & Bruno Martorano & Chris De Neubourg, 2012. "The Impact of Social Protection on Children: A review of the literature," Papers inwopa666, Innocenti Working Papers.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edmonds, Eric V., 2008. "Child Labor," Handbook of Development Economics, in: T. Paul Schultz & John A. Strauss (ed.), Handbook of Development Economics, edition 1, volume 4, chapter 57, pages 3607-3709, Elsevier.
    2. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," World Scientific Book Chapters, in: Globalization And International Trade Policies, chapter 17, pages 623-687, World Scientific Publishing Co. Pte. Ltd..
    3. Eric V. Edmonds & Norbert Schady, 2012. "Poverty Alleviation and Child Labor," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 100-124, November.
    4. Shimamura, Yasuharu & Lastarria-Cornhiel, Susana, 2010. "Credit Program Participation and Child Schooling in Rural Malawi," World Development, Elsevier, vol. 38(4), pages 567-580, April.
    5. Lutfullah Lutf & Shahadat I Haq Yasini, 2018. "Factors Contributing to Child Labor in Afghanistan: A Case Study in Jalalabad City," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 348-372, September.
    6. Vimefall, Elin, 2015. "Income diversification and working children," Working Papers 2015:8, Örebro University, School of Business.
    7. Fabre, Alice & Pallage, Stéphane, 2015. "Child labor, idiosyncratic shocks, and social policy," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 394-411.
    8. Jinnat Ara & Dipanwita Sarkar & Jayanta Sarkar, 2021. "Like mother like daughter? Occupational mobility among children under asset transfer program in Bangladesh," QuBE Working Papers 061, QUT Business School.
    9. Sylvain E. Dessy & Flaubert Mbiekop & Stéphane Pallage, 2005. "The Economics of Child Trafficking (Part II)," Cahiers de recherche 0509, CIRPEE.
    10. Sonia Bhalotra, 2007. "Is Child Work Necessary?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(1), pages 29-55, February.
    11. Fuwa Nobuhiko & Ito Seiro & Kubo Kensuke & Kurosaki Takashi & Sawada Yasuyuki, 2012. "How Does Credit Access Affect Children's Time Allocation?: Evidence from Rural India," Journal of Globalization and Development, De Gruyter, vol. 3(1), pages 1-28, June.
    12. Jean-Marie Baland & Timothée Demont & Rohini Somanathan, 2020. "Child Labor and Schooling Decisions among Self-Help Group Members in Rural India," Economic Development and Cultural Change, University of Chicago Press, vol. 69(1), pages 73-105.
    13. Hazarika, Gautam & Sarangi, Sudipta, 2008. "Household Access to Microcredit and Child Work in Rural Malawi," World Development, Elsevier, vol. 36(5), pages 843-859, May.
    14. 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.
    15. Del Carpio, Ximena V., 2008. "Does child labor always decrease with income ? an evaluation in the context of a development program in Nicaragua," Policy Research Working Paper Series 4694, The World Bank.
    16. Bratti, Massimiliano & Mendola, Mariapia, 2014. "Parental health and child schooling," Journal of Health Economics, Elsevier, vol. 35(C), pages 94-108.
    17. Lim, Sung Soo, 2020. "Parental chronic illness and child education: Evidence from children in Indonesia," International Journal of Educational Development, Elsevier, vol. 73(C).
    18. Alvi, Eskander & Dendir, Seife, 2011. "Weathering the Storms: Credit Receipt and Child Labor in the Aftermath of the Great Floods (1998) in Bangladesh," World Development, Elsevier, vol. 39(8), pages 1398-1409, August.
    19. Rodrigo R. Soares & Diana Kruger & Matias Berthelon, 2012. "Household Choices of Child Labor and Schooling: A Simple Model with Application to Brazil," Journal of Human Resources, University of Wisconsin Press, vol. 47(1), pages 1-31.
    20. Krisztina Kis-Katos, 2012. "Gender differences in work-schooling decisions in rural North India," Review of Economics of the Household, Springer, vol. 10(4), pages 491-519, December.

    More about this item

    Keywords

    Microcredit; child labour; school enrolment; instrumental variable; treatment effect;
    All these keywords.

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:16842. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.