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Understanding the Impact of Low-Cost Loans on Forced Labor

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  • Anisha Sharma
  • Manisha Shah
  • Beata Łuczywek

Abstract

Approximately 27.5 million individuals fell victim to forced labor in 2021. The Indian construction industry is particularly vulnerable to forced labor as workers experience excessive work hours, required work on rest days, and unpaid wages. Micro-contractors (MCs), who oversee worker environments, frequently struggle with their own financial constraints due to limited access to working capital. This study investigates whether alleviating MC liquidity constraints improves labor conditions for their workers in Bengaluru and Delhi by offering randomly selected MCs access to low-cost loans. Our findings reveal this intervention does not improve working conditions overall; in fact, some outcomes slightly worsen. However, workers employed by more educated and non-migrant treatment MCs experience significantly better labor conditions, underscoring important heterogeneity among MCs. This research offers new causal insights into efforts to combat forced labor.

Suggested Citation

  • Anisha Sharma & Manisha Shah & Beata Łuczywek, 2024. "Understanding the Impact of Low-Cost Loans on Forced Labor," NBER Working Papers 32912, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32912
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    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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