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Research ArticleArticles

Unintended Consequences of a Well-Intentioned Policy: Impact of Credit on Child Labor in Bangladesh

Md Amzad Hossain
Published online before print February 07, 2023, 0920-11179R2; DOI: https://doi.org/10.3368/jhr.0920-11179R2
Md Amzad Hossain
Md Amzad Hossain is an Assistant Professor in the Department of Economics at the University of Arkansas, Fayetteville, AR-72701. Email: . Phone number: +1-434-466-1313.
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Abstract

Canonical models of credit suggest that relaxing credit constraints can increase human capital investment in children. However, when credit brings new business opportunities within reach in economies with many labor market frictions, increased access to credit might increase the use of child labor by increasing the opportunity cost of a child’s time. In this study, I use data from a randomized controlled experiment to examine the effect of an agricultural credit expansion program in Bangladesh and find an increase in child labor. I present evidence that this increase in child labor is due to a rise in new opportunities for children to work in household self-employment activities. I also find that treated households with fewer working adults use more child labor and spend less on education. While I do not see any effect on schooling outcomes, the time budget survey reveals that children from treated areas spend significantly less time studying. Overall, these findings raise concerns about the unintended inter-generational consequences of easing credit constraints to increase self-employment.

Keywords:
  • Agricultural microcredit
  • child labor
  • human capital
  • unitary model of household
JEL codes:
  • G21
  • J13
  • O15
  • J21

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Journal of Human Resources: 60 (3)
Journal of Human Resources
Vol. 60, Issue 3
1 May 2025
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Unintended Consequences of a Well-Intentioned Policy: Impact of Credit on Child Labor in Bangladesh
Md Amzad Hossain
Journal of Human Resources Feb 2023, 0920-11179R2; DOI: 10.3368/jhr.0920-11179R2

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Unintended Consequences of a Well-Intentioned Policy: Impact of Credit on Child Labor in Bangladesh
Md Amzad Hossain
Journal of Human Resources Feb 2023, 0920-11179R2; DOI: 10.3368/jhr.0920-11179R2
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Keywords

  • Agricultural microcredit
  • child labor
  • human capital
  • unitary model of household
  • G21
  • J13
  • O15
  • J21
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