Three essays on development and labour economics

This thesis is a collection of three self-contained papers in development and labour economics. The first two chapters study the impact of microfinance programs using a new, large and unique cross-section dataset from Bangladesh. Chapter 1 evaluates the impact of microfinance programs on household consumption. The program eligibility requirement and the richness of the data allowed the use of a number of non-experimental impact evaluation techniques, in particular Instrumental Variable (IV) estimation and Propensity Score Matching (PSM). Estimates from both IV and PSM strategies have been interpreted as average causal effects that are valid for various groups of participants in microfinance. The overall results indicate that the effects of micro loans on consumption are not robust across all groups of poor household borrowers. It appears that the poorest of the poor participants are among those who benefit most. The benefits are lower, or sometimes even negative, for households that are marginal to the participation decision. The effects of participation are, in general, stronger for male borrowers. Chapter 2 uses a similar methodology to examine the impact of these microfinance programs on child welfare, specifically on school attendance and child labour in rural Bangladesh. The empirical results indicate that household participation in a microcredit program may increase child labour and reduce school enrolment. The effects are more pronounced for girls than boys, and they appear to vary inversely with age, with younger children tending to be strongly affected. The estimated effects also vary by income, education and asset holding of households such that the children of poorer and less educated households are affected most adversely. Finally Chapter 3, employing similar econometric techniques for estimating causal effects, investigates the impact of the changing skill composition of immigrant flows on the structure of Australian wages. Immigrants may self-select to join labour markets in the better performing industrial countries. We address the resulting endogeneity problem using different IV techniques. While existing studies typically use cross-section data, we use macro data to allow for the adjustment of wages and aggregate demand to immigration flows. Our estimation strategies generate results that are consistent with the dominant findings from existing empirical work. We find no robust evidence that a relative increase in skilled immigrants exerts any discernible adverse consequences on the wage structure in Australia.