Loan Regulation and Child Labor in Rural India

Basab Dasgupta () and Christian Zimmermann

No 6979, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the impact of loan regulation in rural India on child labor with an overlapping-generations model of formal and informal lending, human capital accumulation, adverse selection, and differentiated risk types. Specifically, we build a model economy that replicates the current outcome with a loan rate cap and no lender discrimination by risk using a survey of rural lenders. Households borrow primarily from informal moneylenders and use child labor. Removing the rate cap and allowing lender discrimination markedly increases capital use, eliminates child labor, and improves welfare of all household types.

Keywords: child labor; India; informal lending; lending discrimination; interest rate caps (search for similar items in EconPapers)
JEL-codes: E26 O16 O17 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-10
New Economics Papers: this item is included in nep-agr, nep-ban, nep-dem, nep-dev, nep-dge, nep-iue and nep-mfd
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Related works:
Working Paper: Loan Regulation and Child Labor in Rural India (2012)
Working Paper: Loan regulation and child labor in rural India (2012)
Working Paper: Loan Regulation and Child Labor in Rural India (2012)
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