Association for Public Policy Analysis & Management

Qualitative evidence suggests that, In India, parents dislike delaying a daughter’s marriage for reasons like higher dowry, declining number of potential matches, protection from sexual assault and pregnancy. However, early marriage can have adverse effects on the health and education of women and their children (Field and Ambrus, 2008; Chari, Heath, Maertens and Fatima, 2016). Therefore, marriage timing is a major focus of research on women’s welfare in developing countries. Additionally, in India, almost always, a daughter’s wedding is accompanied with large dowry payments to the groom’s family. This implies that access to finance is likely to play a key role in the timing of marriage.

 Increasing access to finance is one of the most popular policy instruments used across the developing world today. There is a growing literature on the effects of access to finance on outcomes such as household consumption, health, education, agricultural investment and productivity, and many more (Banerjee, Duflo, Glennerster and Kinnan, 2015; Kaboski and Townsend, 2011, 2012). However, very little is known about how these policies differentially affect women during critical stages of their lives. This paper estimates the effect of increasing rural banks on the probability of marriage of women and men in India.

 Using an instrumental variables approach, I find that the probability of marriage increases for girls but decreases for boys in response to an increase in per capita rural bank branches. These results are consistent with the theory that access to finance makes it easier for the daughters’ households to pay dowries but replaces dowries as a source of financing for the sons’ households. I posit that an increase in access to finance leads to the tightening of the "marriage squeeze", that is, the pool of potential brides increases with younger girls entering the marriage market and the pool of potential grooms shrinks with older boys entering the marriage market. Consistent with this result of a tighter "marriage squeeze", I find that an increase in per capita rural banks leads to an increase in the spousal age gap and the distance travelled by brides in search of potential grooms. However, I find that average dowries paid decreases in response to an increase in per capita rural banks. Further investigation reveals that the decrease in dowries is concentrated in marriages with greater marriage migration of brides. I argue that as the “marriage squeeze” intensifies in response to greater access to finance, brides’ families spend more resources in search of potential grooms. Given a budget constraint, this decreases the amount that brides’ households are willing to pay for dowry.

 Increase in spousal age gaps and women’s marriage migration can lead to lower status and bargaining power in their households (Fulford, 2015). I explore if positive female labor demand shocks can increase the value of an unmarried daughter and loosen the "marriage squeeze" effect of banking. However, I find that short-term increases in women’s labor market opportunities in the agricultural industry fail to significantly mitigate the marriage market effects of rural bank branch expansion.