The Impact of Micro-credit on Employment

Evidence from Bangladesh and Pakistan

Azhar Khan, Twyeafur Rahman, Robert E. Wright

Research output: Working paperDiscussion paper

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Abstract

This paper examines the impact of micro-credit on employment. Household-level data was collected, following a quasi-experimental design, in Bangladesh and Pakistan. Three borrower groups are compared: Current borrowers; Pipeline borrowers and Non-borrowers. Pipeline borrowers are included to control for self-selection effects. It is argued that micro-credit causes a substitution of employment away from employment-for-pay to self-employment. Therefore, the effect on total employment is ambiguous. OLS and fixed effects regression are used to examine separately self-employment and employment-for-pay between three groups of borrowers. For Pakistan, there is no evidence that micro-credit effects employment. However, for Bangladesh, there is robust evidence consistent with this hypothesis.
Original languageEnglish
Place of PublicationBonn
Volumeno. 10046
Publication statusPublished - 21 Jul 2016

Fingerprint

Microcredit
Pakistan
Bangladesh
Self-employment
Employment effects
Household
Selection effects
Substitution
Experimental design
Fixed effects
Self-selection

Keywords

  • micro-credit
  • poverty
  • self-employment

Cite this

Khan, A., Rahman, T., & Wright, R. E. (2016). The Impact of Micro-credit on Employment: Evidence from Bangladesh and Pakistan. Bonn.
Khan, Azhar ; Rahman, Twyeafur ; Wright, Robert E. / The Impact of Micro-credit on Employment : Evidence from Bangladesh and Pakistan. Bonn, 2016.
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The Impact of Micro-credit on Employment : Evidence from Bangladesh and Pakistan. / Khan, Azhar; Rahman, Twyeafur; Wright, Robert E.

Bonn, 2016.

Research output: Working paperDiscussion paper

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AB - This paper examines the impact of micro-credit on employment. Household-level data was collected, following a quasi-experimental design, in Bangladesh and Pakistan. Three borrower groups are compared: Current borrowers; Pipeline borrowers and Non-borrowers. Pipeline borrowers are included to control for self-selection effects. It is argued that micro-credit causes a substitution of employment away from employment-for-pay to self-employment. Therefore, the effect on total employment is ambiguous. OLS and fixed effects regression are used to examine separately self-employment and employment-for-pay between three groups of borrowers. For Pakistan, there is no evidence that micro-credit effects employment. However, for Bangladesh, there is robust evidence consistent with this hypothesis.

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