Understanding the Impact of Low-Cost Loans on Forced Labor

Anisha Sharma, Manisha Shah () and Beata Łuczywek

No 32912, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Approximately 27.5 million individuals fell victim to forced labor in 2021. The Indian construction industry is particularly vulnerable to forced labor as workers experience excessive work hours, required work on rest days, and unpaid wages. Micro-contractors (MCs), who oversee worker environments, frequently struggle with their own financial constraints due to limited access to working capital. This study investigates whether alleviating MC liquidity constraints improves labor conditions for their workers in Bengaluru and Delhi by offering randomly selected MCs access to low-cost loans. Our findings reveal this intervention does not improve working conditions overall; in fact, some outcomes slightly worsen. However, workers employed by more educated and non-migrant treatment MCs experience significantly better labor conditions, underscoring important heterogeneity among MCs. This research offers new causal insights into efforts to combat forced labor.

JEL-codes: J21 J28 J81 O12 O15 (search for similar items in EconPapers)
Date: 2024-09
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