Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/67145 
Year of Publication: 
2012
Series/Report no.: 
IZA Discussion Papers No. 6979
Publisher: 
Institute for the Study of Labor (IZA), Bonn
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.
Subjects: 
child labor
India
informal lending
lending discrimination
interest rate caps
JEL: 
O16
O17
E26
Document Type: 
Working Paper

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