Written by Nobuhiko Fuwa, Seiro Ito, Kensuke Kubo, Takashi Kurosaki, and Yasuyuki Sawada, and released January 2009 as Discussion Paper No. 183 by the Institute for Developing Economies (IDE), 23 pages, full text available at: http://www.microfinancegateway.org/files/56716_file_ARRIDE_Discussion_No.183_kubo.pdf
In “How Does Credit Access Affect Children’s Time Allocation? Evidence From Rural India”, the authors seek to quantitatively analyze the effect of credit access on the amount of time allocated by children to leisure, work, and school. This preliminary discussion paper was published by the Institute of Developing Economies (IDE), a semigovernmental research organization that merged with the Japanese External Trade Organization in 1998. This study was conducted in the Kurnool district of Andhra Pradesh, where the child labor rate is unusually high at 54.2 percent. Terming education “the most important investment the poor can make,” the authors remark that the research has recently been showing that an increase in child labor does not necessarily lead to a decrease in schooling because leisure time is reduced instead. However, the authors claim that there has not yet been a comprehensive empirical study of how the allocation of time by various members of the household is is linked to credit access in the area. The chief achievement of this study is the methods of data analysis, which strictly establish by controlling for all other variables that the lack of credit access reduces time spent on both schooling and leisure in favor of time spent working.
In an effort to base conclusions on data collection rather than experimental models, the authors determined the level of credit access by distributing questionnaires on the experience of each household with formal credit sources in the past 12 months. Previous studies had not examined actual experiences with credit sources, but had applied an exogenous shock model to the households. Formal credit sources had become increasingly available in the area and thus the constraint in this study was a question of whether a household was considered a viable loan applicant rather than whether a lending institution was available to it. 400 households in 32 villages in a single district were surveyed and classified as unconstrained or credit-constrained. Households that had not applied for loans were classified as credit-constrained if the reason was that the household did not expect to be approved. Through statistical models, the study controlled for the individual characteristics of the child, the gender of the child, the education of the parents, land holdings, livestock holdings, and caste status in addition to many other variable factors. The authors attempted to make credit access the sole variable amongst all the households. 164 of the 331 households used for data analysis were classified as credit-constrained.
Taking into account that a significant portion of child labor occurred within the home, the activities of the children were classified by the authors in the following categories:
(1) Schooling
(2) Household Chores Including Child Care
(3) Remunerative Work
(4) Leisure
The report includes five tables listing the results of the applications of the statistical models and illustrate characteristics of unconstrained or credit-constrained household as well as how variables other than credit access affected time distribution. The authors conclude that per week, children of credit-constrained households spent 1.4 days less in school and 2.1 days less for leisure time than children of unconstrained households. Children of credit-constrained households also spent 1.6 days more per week for remunerative work and 1.6 days more for household work. Increase in household chores and remunerative work were twice as large as the decrease in schooling, which indicates that some leisure time was reduced in favor of schooling. However, the lack of credit access reduced time allocated to schooling by children in the household by 60 percent overall. Despite the presence of formal credit sources in the area, the success or failure of loan applications can lead to vast discrepancies in the time invested by children in all four categories of activities.
By Goda Thangada, Research Assistant
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