Borrower discouragement and multidimensional child deprivation in Ghana

Abstract

<p>With increasing scholarly attention on child deprivation to understand its drivers and potential policies needed for its alleviation, the discouraged borrower syndrome has received little attention despite its potential role in stiffing household resources needed to cater for the needs of children. Using the seventh round of the Ghana Living Standards Survey data, this study examines the effect of borrower discouragement on multidimensional child deprivation. Endogeneity associated with borrower discouragement is instrumented with the number of neighbours that are discouraged. We found that the share of children who are multidimensionally deprived in Ghana is 40.8 percent. Our endogeneity-corrected estimates show that borrower discouragement is associated with 4.0 percentage point increase in multidimensional child deprivation. This outcome is consistent across different quasi experimental methods, and alternative cutoffs used in identifying the multidimensionally deprived child. The results also suggest that the effect of borrower discouragement on child deprivation is more pronounced among rural-located children (in general) and girls (in particular). We identify inability of non-farm business start-ups and reduction in household per-capita income as potential channels through which borrower discouragement affects multidimensional child deprivation.</p>