Prices, Credit Markets and Child Growth in Low-Income Rural Areas

In this paper, it is argued that fluctuations in child growth in rural areas of Bangladesh during and after severe floods in 1988 can provide insight into the structure of credit markets. A model of intertemporal resource allocation is developed and Euler equations relating growth patterns of children to the cost of borrowing by household are then derived from the model. The evidence indicates that, although some of the variation in growth patterns over the relevant period may be attributed to variation in illness and the price of rice, growth patterns for children in landless households were influenced by credit market imperfections. Copyright 1995 by Royal Economic Society.