credit constraints and the phenomenon of child labor abstract this paper develops an overlapping generations general equilibrium model where inefficient child labor arises due to credit constraints it derives a positive relationship between inequality in the distribution of income and the incidence of child labor looking at policy implications it shows how trade sanctions against countries using child labor may fail to reduce the incidence of child labor it discusses some alternative policies to reduce the incidence of child labor

credit rationing in small scale enterprises special microenterprise programmes in ecuador small scale enterprises receive several forms of aid but many are denied access to formal loans a demand and supply model is estimated to analyse the factors lenders use to ration credit in special microenterprise programmes the results reveal that suppliers do not discriminate against less profitable enterprises and entrepreneurs who have not completed their high school education however these entrepreneurs have a smaller demand for external finance from the microenterprise programmes than more profitable enterprises and entrepreneurs who have graduated from high school

a defense of compulsive measures against child labor abstract this research characterizes policies likely to trigger the onset of a growth enhancing fertility transition even for an economy with initially a low per capita income the environment considered is one where children s time has an economic value and schooling and child labor are the main competing claims on a child s time using a one parent family overlapping generations model i argue that compulsive measures against child labor are justifiable as an integral part of an intervention that combines incentives and regulations in order to eliminate child labor the analysis highlights fertility and child labor dynamics as shaped by the relative cost of children

agricultural household models extensions applications and policy this book presents the basic model of an agricultural household that underlies most of the case studies undertaken so far the model assumes that households are price takers and is therefore recursive the decisions modeled include those affecting production and the demand for inputs and those affecting consumption and the supply of labor comparative results on selected elasticities are presented for a number of economies the empirical significance of the approach is demonstrated in a comparison of models that treat production and consumption decisions separately and those in which the decisionmaking process is recursive the book summarizes the implications of agricultural pricing policy for the welfare of farm households marketed surplus the demand for nonagricultural goods and services the rural labor market budget revenues and foreign exchange earnings in addition it is shown that the basic model can be extended in order to explore the effects of government policy on crop composition nutritional status health saving and investment and to provide a more comprehensive analysis of the effects on budget revenues and foreign exchange earnings methodological topics primarily the data requirements of the basic model and its extensions along with aggregation market interaction uncertainty and market imperfections are discussed the most important methodological issues the question of the recursive property of these models is also discussed

the economics of child labor if child labor as a mass phenomenon occurs not because of parental selfishness but because of the parents concern for the household s survival the popular argument for banning child labor loses much of its force however this assumption about parental decision making coupled with the assumption of substitutability in production between child and adult labor could result in multiple equilibria in the labor market with one equilibrium where children work and another where adult wage is high and children do not work the paper establishes this result and discusses its policy implications copyright 1998 by american economic association

access to capital and its impact on agrarian structure and productivity in kenya access to capital and its distribution across agents can profoundly shape the structure and performance of an agrarian market economy it is conceptually useful to distinguish between ex ante and ex post capital access ex ante capital access denotes the ability of agents to finance production costs e g labor and purchased inputs costs which must be paid ex ante that is prior to the actual realization of production ex post capital access that is access to capital after the realization of the production process is of particular importance as an insurance substitute in low income agrarian economies where contingency markets are imperfect buoyant ex post capital access would permit an individual to stabilize consumption year to year even as production fluctuates annually a number of theoretical models have ex

credit constraints credit unions and small scale producers in guatemala abstract efficient and equitable development outcomes may depend in part on whether formal financial institutions leave low wealth producers tightly constrained in their access to credit if so can cooperative institutions efficiently relax these constraints these issues are explored using survey data gathered from 950 small scale producer households in areas of guatemala with market oriented credit unions that mobilize savings and make unsubsidized loans nonprice rationing by banks is found to be common among lower wealth households while credit unions relax credit constraints for a significant portion of those rationed by banks but not the poorest of the study households

child labor cause consequence and cure with remarks on international labor standards although the literature on child labor is enormous it lacks a common theoretical foundation in this paper analytical survey of this field is provided keeping in mind that this is an area where the primary reason for theorizing is ultimately to influence policy overall it is noted that the literature on child labor is an illustration of abundance and anarchy although empirical writings on child labor are numerous they are not usually founded on theory it is argued that there is much that can be done in curbing the issue of child labor several theories were studied in this paper including collaborative intervention such efforts include public action which alters the economic environment such that the parents of their own accord prefer to withdraw the child from labor force another strategy involves the government a legal intervention is enforcing a total ban on the subject although such interventions have good intentions some of them may not be feasible in general it is better to take economy wide measures against child labor and if there is to be a sector specific ban it should be based on the working conditions of that sector rather than the destination of the goods

is child labor inefficient we build a model of child labor and study its implications for welfare we assume that there is a trade off between child labor and the accumulation of human capital even if parents are altruistic and child labor is socially inefficient it may arise in equilibrium because parents fail to fully internalize its negative effects this occurs when bequests are zero or when capital markets are imperfect we also study the effects of a simple ban on child labor and derive conditions under which it may be pareto improving in general equilibrium we show that the implications of child labor for fertility are ambiguous

child labour and resistance to change we study the interaction between technological innovation investment in human capital and child labour in a two stage game first firms decide on innovation then households decide on education in equilibrium the presence of inefficient child labour depends on parameters related to technology parents altruism and the diffusion of firms property child labour is due either to firms reluctance to innovate or to households unwillingness to educate or both in some cases compulsory schooling laws or a ban on child labour are welfare reducing whereas a subsidy for innovation is the right tool to eliminate child labour and increase welfare

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

empirical measurement of credit rationing in agriculture a methodological survey empirical analysis of rural credit market failure has been of key scientific and political interest in recent years the aim of this article is to give an overview of the various methods for measuring credit rationing that are employed in the literature furthermore the methods are subjected to a comparative evaluation of their specific strengths or shortcomings six approaches are distinguished measurement of loan transaction costs analysis of qualitative information collected in interviews analysis of quantitative information collected in interviews using the credit limit concept analysis of spill over effects with regard to secondary credit sources econometric household modeling and the econometric analysis of dynamic investment decisions an explicit comparison with a first best solution is impossible in the first three approaches since they essentially rely on a subjective assessment of borrowers access to credit based on qualitative or quantitative indicators the fifth and sixth approaches allow a rigorous interpretation in the framework of neoclassical equilibrium theory the fourth approach takes an intermediate position since spill over on segmented loan markets reveals a willingness to pay with regard to the supposedly less expensive but rationed primary source the approaches are fairly data demanding in general usually requiring specific data on loan transactions even so most approaches are applicable to cross sectional household data with the exception of the first all methods surveyed might plausibly be used to empirically detect credit rationing

child labor and coordination failures abstract in this note we show that a technology based coordination failure may explain the emergence of laws restricting child labor child labor may arise because of the lack of a coordination mechanism between parental decisions to invest in the human capital of their children and firms decisions to invest in skill biased technologies legislative intervention in many cases helps coordinate expectations towards a pareto superior outcome with investments both in human capital and in skill biased technologies

comparative analysis of investment models for new york dairy farms traditional and dynamic investment models were estimated using farm level dairy data the traditional model predicted more variability in desired capital and less variability in the adjustment rate than did the dynamic model overall the traditional model performed better both models suggest a significant delay between changes in the determinants of desired capital stock and the actual investment expenditure new york dairy farmers may be making more extensive use of existing capital before making additional expenditures another explanation may be our use of farm level data where investment is periodic and discrete most other studies have used aggregate data

fundamental q cash flow and investment evidence from farm panel data this study used a 1976 1992 panel data set to test whether farm machinery investors face finance constraints tests were based on fundamental q investment equations in which cash flow was added as an additional explanatory variable results indicated that 1 credit constraints were generally not a problem during the 1970s boom 2 credit constraints became a problem during the 1980s and early 1990s because of tighter credit and or more conservative financial managerial styles 3 the investment cash flow relationships of low debt and older operator farms were not significantly affected by farm business cycles and 4 the investment cash flow relationships of high debt and young operator farms were affected strongly by business cycles debt level was the strongest determinant of credit constraints asset size and operator age were less important

access to credit plot size and cost inefficiency among smallholder tobacco cultivators in malawi abstract using data from the malawi financial markets and household food security survey this paper examines the effect of access to credit from formal sources and tobacco plot size on cost inefficiency among malawian smallholder tobacco cultivators farm specific cost inefficiency is estimated within the framework of stochastic frontier analysis access to credit is measured as the sum of household members self reported credit limits at credit organisations arguably a truer measure of an exogenous credit constraint than credit program participation or actual loan uptake it is found that tobacco cultivation is significantly less cost inefficient per acre on larger plots while access to credit by itself has no statistically discernible effect on cost inefficiency it reduces the gain in cost efficiency from a larger plot size

costly monitoring loan contracts and equilibrium credit rationing this paper develops a model with asymmetrically informed agents and costly monitoring of loan contracts where an equilibrium can exhibit credit rationing borrowers are identical ex ante but some receive loans and others do not in contrast to existing credit rationing theories rationing does not occur here due to inflexible prices adverse selection or moral hazard optimizing behaviour produces a standard debt contract in equilibrium the aggregate quantity of loans and equilibrium interest rates respond differently depending on whether there is rationing in equilibrium

an analysis of significant contributions to the international business literature the growing interest in international business has been accompanied by a dramatic rise in the volume of international business research this note examines the international business publication records for both authors and academic institutions for the ten year period 1980 1989 nine separate publications were reviewed containing some 659 international business articles weighted and unweighted rankings are reported

the economics of child labor comment in a recent paper kaushik basu and pham hoang van bv 1998 develop an important and very interesting model in which a fairly productive economy exhibits multiple equilibria with children working in at least one they identify two assumptions as essential to this result the first which they call the luxury axiom is that a family sends its children to the labor market only if its income from sources other than child labor is very low the second is embodied in their substitution axiom which states that from the point of view of firms child labor is substitutable for adult labor in this comment we show that in addition to these two assumptions about the micro level behavior of households and firms there is also an essential macro level assumption that may be termed the distribution axiom income or wealth from non labor sources must be sufficiently concentrated in the hands of a few agents we establish that if non labor income is distributed with sufficient equality a market equilibrium with child labor cannot exist in the bv model beyond their contribution as an extension of bv s theory our results formalize a proposition implicit in recent policy discussions of child labor christiaan grootaert and ravi kanbur 1995 note that as household level poverty is well known to be the major cause of child labor g eneral economic development equitably distributed is the best and most sustainable way of reducing child labor p 198 emphasis added policy documents from the international labor organization ilo have long conveyed this view and now the world bank appears to as well peter fallon and zafiris tzannatos 1998 there is a growing recognition that while economic development and development policies are necessary to eliminating child labor they are not always sufficient on their own distributional considerations matter indeed in the case in which bv s model yields multiple equilibria th this abstract was borrowed from another version of this item

transaction costs of credit to the small scale sector in the philippines discussions on the cost of credit in less developed countries seldom include the transaction costs of lending these costs consists of the cost of administering credit and the cost of risk of default this study attempts to present estimates of these transaction costs of lending to the small scale sector by different financial institutions in the philippines recipients of the loans are subdivided by size and activity the problem of extending credit to the small scale sector is that the real cost of lending to small farmers is three times and to small scale industry is twice that of lending to large scale industry therefore lending to the smalll scale sector is feasible only under one or a combination of the following financial arrangements high interest rates cheaper funds from the central bank or cross subsidization the philippine experience shows that certain specialized lending institutions are an appropriate vehicle for extending credit to the small scale sector rural banks are a particularly good example since administrative costs are low and price or allocative efficiency is sufficiently higher than that of private development banks

market imperfections and output loss in the presence of expenditure constraint a generalized shadow price approach in view of widespread capital market imperfections and farmers budget constraints in developing countries an indirect production function ipf is used for a study of 289 indian paddy growers the analysis generalizes the ipf to accommodate the numerous kinds of market imperfections and policy induced distortions that pervade less developed countries agriculture the presence of these distortions in an expenditure constrained situation results in a loss of output defined as the difference between maximal potential output and actual output for the sample of farmers average output loss is found to be in the range of 12

behavioural and material determinants of production relations in agriculture in this essay we develop a framework for analysing the major institutions governing the production and exchange of output and the primary factors of production in rural areas the analysis incorporates general considerations of risk and information constraints jointly with the principal material attributes of agriculture and of agricultural production factors the framework is used to analyse barriers to the existence of the major intertemporal and factor markets it is applied specifically to land scarce environments for which it provides an internally consistent explanation for many of the well documented institutional features of such settings in addition the analysis provides new implications for among other phenomena the inter relationships among ownership holdings operational scale family size and factor productivity for the scarcity of animal rental markets and use of animals as collateral for the renting out of land by small landowners and for the existence of plantations for certain crops

cropping pattern mechanization child labor and fertility behavior in a farming economy rural egypt tractor and the use of mechanical irrigation is increasing in the countryside the significant policy issue is the role of government in encouraging or discouraging continued labor saving mechanization present policy substantially encourages mechanization diesel oil is available at prices considerably lower than those in many other countries village banks provide farmers with equipment loans at rates below commercial levels machinery is imported at favorable foreign exchange rates and is exempted from import duties the most telling impact of these policies has been on the rapidly growing use of tractors and irrigation pumps both of which are believed to displace labor especially that of children this article addresses the question of whether such changes have indeed had the desired effect on child employment and family size recent developments in the egyptian agricultural sector also reveal significant changes in crop patterns these favor fruit and vegeta

interactions between institutional and informal credit agencies in rural india in an attempt to expand rural credit and displace the village moneylender india created a system of rural cooperatives in the 1950s and expanded branch banking into rural areas in the 1970s this article examines how these measures affected the rural market it begins with the question of how large the expansion of institutional credit has been and the extent to which it has dislodged the village and nonresident moneylenders a detailed comparison of three major surveys of the indian rural credit market suggests that in various guises the moneylender is still a major source of loans the article also examines the weak evidence on intermediation between the formal and informal sectors a formal model of the interaction between the informal moneylender and institutional lender is constructed under a variety of assumptions about the exclusivity of loan contracts and the competitive structure of the informal sector the conclusions are drawn together in the form of five proposals for public policy