Does productive microcredit improve rural children's education? Evidence from rural Vietnam

Phan, Chung Phan, Sun, Sizhong, Zhou, Zhang-Yue, Beg, Rabiul, and Ramsawak, Richard (2023) Does productive microcredit improve rural children's education? Evidence from rural Vietnam. Journal of Asian Economics, 84. 101555.

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Whether increasing access to microcredit results in better educational outcomes for children's education in rural areas remains an important but inconclusive topic in development literature. This paper contributes to this strand of research both theoretically and empirically. We develop a theoretical model where a representative household uses microcredit to fund its family business and maximises its lifetime utility. Based on the outcomes of its business, the parents make an optimal decision on the level of their children's schooling investment. Solving the maximisation problem, we show that a household's optimal education for its children is directly related to the level of microcredit. Empirically, we utilise the Vietnam Access to Resources Household Survey (VARHS) dataset from 2008 to 2016 to estimate the impact of microcredit on rural children's schooling. We find that microcredit borrowing by rural households negatively affects their children's education, which is more profound for boys than girls. Policymakers need to be aware of such side effects in designing microcredit policy and adopt auxiliary measures, such as incorporating a clause on children's education in the borrowing terms, to alleviate the negative impact on children's educational outcomes.

Item ID: 78436
Item Type: Article (Research - C1)
ISSN: 1873-7927
Keywords: Children's education, IV Poisson, Microcredit, VARHS, Vietnam
Copyright Information: © 2022 Elsevier Inc. All rights reserved.
Date Deposited: 10 Aug 2023 01:54
FoR Codes: 38 ECONOMICS > 3801 Applied economics > 380104 Economics of education @ 50%
38 ECONOMICS > 3803 Economic theory > 380304 Microeconomic theory @ 50%
SEO Codes: 15 ECONOMIC FRAMEWORK > 1505 Microeconomics > 150599 Microeconomics not elsewhere classified @ 100%
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