Labor market effects of improved access to credit among the poor: evidence from Cape Verde

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DateUnpublished - 9 Jun 2015
Original languageEnglish

Abstract

This paper investigates the impact of microfinance loans on the labor market behavior of recipient households and, in particular, their unemployed members. In the context of a collective household choice model, we show that the effects of improved credit access on search intensity by the unemployed are heterogeneous across households and dependent on the within-household bargaining power of the unemployed. We find empirical support for the predictions of our model using a household survey conducted by the authors in Cape Verde. These findings have important implications for the optimal design of microfinance programs, in particular concerning the targeting of loans and the use of microfinance as an instrument to support improved labor market outcomes in poor countries.

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