Evidence from urban India

In many developing countries, women are prevented to take full advantage of the benefits of living in an urban area. In India, while one of every two men participates in the labor market, it is the case just for one of every six women. In this context, it is thought that access to microfinance is key to bridge the gap and to introduce women into the labor force. This is the first project to rigorously evaluate the long term impact of increasing access to microcredit on female labor force participation. In this study, we exploit quasi-experimental variation in women access to microfinance generated by a unique expansion strategy adopted by the oldest Women Bank in the world. From 1999 onward, the “ Shri Mahil Self Employment Women Association Sahkari (SEWA) Bank” massively introduced the use of loan collection officers which dramatically reduced the transaction cost of getting a loan in Ahmedabad, urban India. Our findings support the hypothesis that access to microfinance integrate women into the labor force in the long run. Even more, our results suggest that this effect is driven by a greater participation of women in household business activity. It does not seem to be associated to a sustainable change in female empowerment. This increase in female labor force participation is accompanied by an increment in the share of household income produced by women. However, this effect fades out in time. Finally, our results also suggests that as a consequence of increasing participation in the labor force, a greater access to micro-finance reduce fertility in the long run. ∗Duke University, [email protected] †Duke University, [email protected] ‡Harvard University, rohini [email protected]