Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/46192
Authors: 
Emerson, Patrick M.
McGough, Bruce
Year of Publication: 
2010
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5249
Abstract: 
This paper constructs a two-period overlapping generations model of human capital investment decisions where a microloan program designed to finance entrepreneurial activities is active. It is shown that, in the presence of human capital externalities (social returns to education) there exists a range of microloan amounts that are growth depressing and welfare decreasing through their affect on the opportunity cost of schooling. By increasing the opportunity cost of schooling, microloans divert investment away from human capital: by failing to internalize the social returns to education, households' individually optimal investment decisions in the face of microcredit availability act to depress the growth of the economy and result in sub-optimal welfare outcomes.
Subjects: 
microloans
growth
human capital
JEL: 
E24
O10
O40
Document Type: 
Working Paper

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