This study investigates the relationship between credit availability and internal migration in rural and semi-urban Thailand during the period of 1998 – 2007. I exploit the introduction of the Village Fund Program (VFP), a micro-finance scheme, to test whether greater availability of credit at village level has a direct effect on the decision to migrate in the short and long run perspective after policy implementation. I apply an Instrumental Variables approach, proxying the stock of credit taken from the VFP with the inverse number of households present in each surveyed village at start of the policy. The fixed capital injected by the program generated heterogeneous availability of credit in each village, so the instruments represent the potential credit available to households. I find that the take-up of this type of formal credit reduces the probability of migrating in the long term and does not affect migration just after credit is injected. Secondly, I compare formal credit to kinship transfers, and show that receiving transfers from extended family in a previous period reduces the probability of migrating in the short run but not in the long run. Given the available evidence for Thailand, it seems that improved access to credit can ease households’ constraints, thus reducing the probability of migrating.
Keywords: Internal migration, Credit availability, Kinship Transfers.
Moderator: Ms.Suporn Jaratsit
November 12, 2014
