CHILD LABOR AND SCHOOLING RESPONSES TO ACCESS TO MICROCREDIT IN RURAL BANGLADESH

Authors

  • ASADUL ISLAM,

    1. Islam: Lecturer (Assistant Professor), Department of Economics, Monash University, Caulfield East, VIC 3145, Australia. Phone +61 3 9903 2783, Fax +61 3 9903 1128, E-mail Asadul.Islam@monash.edu
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  • CHONGWOO CHOE

    1. Choe: Professor, Department of Economics, Monash University, Caulfield East, VIC 3145, Australia. Phone +61 3 9903 4520, Fax +61 3 9903 1128, E-mail Chongwoo.Choe@monash.edu
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    • We are thankful to Dietrich Fausten, Ronald Caldwell, John Gibson, Guang-Zhen Sun, Michael Keane, Glenn Harrison, Bruce Weinberg, Mark Harris, Pushkar Maitra, Chikako Yamauchi, Gigi Foster, Frank Vella, participants at the Western Economic Association annual conference in Vancouver, Managing Selection Workshop at the University of South Australia, the fourth Australasian Development Workshop at the Australian National University, two anonymous referees of this journal, and seminar participants at Monash University and Bangladesh Institute of Development Studies (BIDS) for very helpful comments and suggestions. The usual disclaimer applies.


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 article, we examine the impact of access to microcredit on children's education and child labor using a new and large data set from rural Bangladesh. The results show that household participation in a microcredit program may increase child labor and reduce school enrollment. 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. (JEL H43, I21, J13, J24, L30, O12)

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