The Effect of Investment Credit on Children's Schooling: Evidence from Pakistan

Abstract

This paper studies the influence of credit on children's schooling using data from Pakistan. It shows that credit need not increase the likelihood of school attendance for children who work in their household's non-farm enterprise. Moreover, credit obtained for investment purposes may reduce the likelihood of schooling for children who currently work in their family business. On average, results of this research suggest that for a thousand rupees (approximately 17 dollars) increase in credit obtained for non-farm business reasons, the odds of schooling for children employed in the home enterprise decrease by about 7%. This may be because investment loans increase children's labor productivity, which in turn increases the opportunity cost of schooling. The results of this study suggest that improving access to credit may not, by itself, constitute a solution to the problem of child labor.

Keywords: Credit, Schooling, Child-labor, Pakistan

JEL Classification: J24, J13, O16, O12