Abstract Title

Household Debt and Female Labor-force Participation in India

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1900-01-00

Description

Female labor supply is both a driver and an outcome of development. As more women enter the labor-force, communities generate the potential to grow faster, due to higher labor inputs We examine how female labor-force participation (FLFP) responds to household borrowings in India. A handful number of papers estimate the relationship between household indebtedness and individual labor supply decisions, especially in the context of developing countries (e.g., Belkar, Cockerell & Edwards, 2007 and Atalay, Barrett & Rebecca Edwards, 2016). We use data from The India Human Development Survey-II (IHDS-II), 2011-12, which is a nationally representative, multi-topic survey 42,152 households (27,579 rural and 14,573 urban) in the country. These households are spread across 33 states and union territories, 384 districts, 1420 villages, and 1,042 urban blocks. The data covers information on topics concerning health, education, employment, economic status, marriage, fertility, gender relations, social capital, village infrastructure, wage levels, and panchayat composition. We use the Two stage Least Squares Method and the Control Function Approach in exploring this relationship. We instrument household debt with the number of epidemics in the village in the last seven years. Epidemics can affect people’s health which may lead to debt take-up for treatment. Shutdown of local businesses leading to short-term loss of jobs during epidemics may also force people to take loans to meet daily expenses. Our results indicate that the impact of debt on FLFP is significant and positive and are even stronger when we account for the potential endogeneity in household debt. Providing cheaper/ easy loans to households with more working females or providing incentives to firms that have loan schemes for women. However, it also depends on the attitudes of households and communities towards FLFP. Measures from the government should be taken to encourage communities for higher FLFP.

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Dec 4th, 12:00 AM

Household Debt and Female Labor-force Participation in India

Female labor supply is both a driver and an outcome of development. As more women enter the labor-force, communities generate the potential to grow faster, due to higher labor inputs We examine how female labor-force participation (FLFP) responds to household borrowings in India. A handful number of papers estimate the relationship between household indebtedness and individual labor supply decisions, especially in the context of developing countries (e.g., Belkar, Cockerell & Edwards, 2007 and Atalay, Barrett & Rebecca Edwards, 2016). We use data from The India Human Development Survey-II (IHDS-II), 2011-12, which is a nationally representative, multi-topic survey 42,152 households (27,579 rural and 14,573 urban) in the country. These households are spread across 33 states and union territories, 384 districts, 1420 villages, and 1,042 urban blocks. The data covers information on topics concerning health, education, employment, economic status, marriage, fertility, gender relations, social capital, village infrastructure, wage levels, and panchayat composition. We use the Two stage Least Squares Method and the Control Function Approach in exploring this relationship. We instrument household debt with the number of epidemics in the village in the last seven years. Epidemics can affect people’s health which may lead to debt take-up for treatment. Shutdown of local businesses leading to short-term loss of jobs during epidemics may also force people to take loans to meet daily expenses. Our results indicate that the impact of debt on FLFP is significant and positive and are even stronger when we account for the potential endogeneity in household debt. Providing cheaper/ easy loans to households with more working females or providing incentives to firms that have loan schemes for women. However, it also depends on the attitudes of households and communities towards FLFP. Measures from the government should be taken to encourage communities for higher FLFP.

https://digitalrepository.unm.edu/hprc/2021/papers/1