Informal Credit Markets, Common-pool Resources and Education

Frederik Noack () and Marie–Catherine Riekhof ()
Additional contact information
Frederik Noack: Bren School of Environmental Science & Management, University of California Santa Barbara
Marie–Catherine Riekhof: ETH Zurich, Switzerland

No 16/252, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: The paper analyses the effect of interest rate changes on education and child labor in an economy with a high-skilled sector, a low-skilled sector and fragmented credit markets. The high-skilled sector takes educated labor as input. The low-skilled sector takes unskilled labor, physical capital and natural common-pool resources as inputs. Credit supply consists of (a) loans with collateral in form of productive investments in the low-skilled sector and (b) higher-priced loans without collateral. Lower interest rates increase the net present value of the returns to education. They also reduce costs of capital investment in current production. This increases labor productivity and the opportunity costs of education. Overuse of the common-pool resource can reverse this productivity effect. We show that the overall effect of interest rate changes on education depends on the initial wealth of the household, resource use and the credit market segment that is subject to improvements.

Keywords: Informal Credit Markets; Education; Common-pool Resources; Child Labor; Fragmented Credit Markets; Common-pool Externality (search for similar items in EconPapers)
JEL-codes: D13 D91 J24 O16 Q20 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-07
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cer.ethz.ch/content/dam/ethz/special-in ... papers/WP-16-252.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not found UA (http://www.cer.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-252.pdf [301 Moved Permanently]--> https://www.cer.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-252.pdf [301 Moved Permanently]--> https://cer.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-252.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:16-252

Access Statistics for this paper

More papers in CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich Contact information at EDIRC.
Bibliographic data for series maintained by ().