Faculty of Economics and Business Administration Publications Database

The Schubert Effect: When Flourishing Businesses Crowd Out Human Capital

Leinyuy, Jibirila
Seabright, Paul
Volume: 68
Pages: 124 - 135
Month: April
ISSN-Print: 0305-750X
Link External Source: Online Version
Year: 2015
Keywords: Credit constraints; Human capital; Business prospects; Family firms

We show that in family or household firms, credit constraints can make business investment a direct competitor to educational investment. We test this theory on data collected in Cameroon. Households that are not restricted by credit constraints invest more in education when demand for the product they produce and sell increases. However, credit-constrained households react in the opposite way: when demand increases, they invest less in education, as predicted by our theory. We obtain these results controlling for endogeneity of family size, of demand conditions, and credit constraints.