Wider Impacts of Microcredit: Evidence from Labor and Human Capital in Urban Mexico
This paper estimates the impact of microcredit on poverty and human capital in urban Mexico. Given that farming activities are limited in the urban context, labor is the only source of livelihood for many. Increased access to credit has an impact on labor intensity and labor hiring.
The study uses data collected from households participating in three microcredit programs in Mexico and is organized into sections comprising:
- Analytical framework to examine the relationship between labor efficiency and credit;
- Quasi-experimental research design followed to control endogeneity and selection bias;
- Econometric procedure to test for the underlying assumptions of non-endogeneity and selection bias;
- Impact of microcredit on labor intensity and labor hiring;
- Impact of microcredit on children’s schooling
- Policy recommendations.
The study found important indirect trickle-down effects of credit that benefit poor laborers’ families when these households reach income levels well above the poverty line. Finding that microcredit had a small but positive impact on children’s schooling, the study suggests that it could be reinforced with improvements in lending technology, school grants and additional preventive and risk-coping products.
