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Does Illiquidity Alter Child Labor and Schooling Decisions? Evidence from Household Responses to Anticipated Cash Transfers in South Africa

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  • Eric V. Edmonds

Abstract

This study considers the response of child labor supply and schooling attendance to anticipated social pension income in South Africa. For black households in South Africa, the social pension is large, highly anticipated, and shared across generations. Moreover, pension benefits are largely determined by age in South Africa's extremely poor black population, and this study uses the age discontinuity in the pension benefit formula for identification. The South African social pension thus presents an unusually clean test of the applicability of the Life-Cycle/Permanent Income model to child labor and schooling decisions in developing countries. In the present case, the data support the theory that liquidity constraints contribute to high levels of child labor. When households become eligible for the social pension in South Africa, the resulting increase in household non-labor income is associated with a sizeable decline in child labor and increases in schooling. Changes in child labor and schooling are largest among pensioners with little formal education. This finding suggests that the current emphasis in development policy of addressing child labor by attacking labor demand may be misdirected.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10265.

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Date of creation: Feb 2004
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Handle: RePEc:nbr:nberwo:10265

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Citations

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Cited by:
  1. Sandra Freire, 2004. "Funeral Costs, Saving Behaviour and HIV/AIDS," Cahiers de la Maison des Sciences Economiques bla04092, Université Panthéon-Sorbonne (Paris 1).
  2. Sonia Bhalotra, 2004. "Parent Altruism, Cash Transfers and Child Poverty," Bristol Economics Discussion Papers 04/561, Department of Economics, University of Bristol, UK.
  3. Basab Dasgupta & Christian Zimmermann, 2012. "Loan Regulation and Child Labor in Rural India," Working Paper Series 70_12, The Rimini Centre for Economic Analysis.
  4. Yang, Dean, 2005. "International migration, human capital, and entrepreneurship : evidence from Philippine migrants'exchange rate shocks," Policy Research Working Paper Series 3578, The World Bank.
  5. Yingying Dong, 2012. "Regression Discontinuity Applications with Rounding Errors in the Running Variable," Working Papers 111206, University of California-Irvine, Department of Economics.
  6. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
  7. Megan Louw & Servaas van der Berg & Derek Yu, 2006. "Educational attainment and intergenerational social mobility in South Africa," Working Papers 09/2006, Stellenbosch University, Department of Economics.
  8. Beath, Andrew & Christia, Fotini & Enikolopov, Ruben, 2012. "Empowering women : evidence from a field experiment in Afghanistan," Policy Research Working Paper Series 6269, The World Bank.
  9. John C. Bluedorn & Elizabeth U. Cascio, 2005. "Education and Intergenerational Mobility: Evidence from a Natural Experiment in Puerto Rico," Economics Series Working Papers 2005-W21, University of Oxford, Department of Economics.
  10. Geeta Kingdon & Nicolas Theopold, 2006. "Do returns to education matter to schooling participation?," Economics Series Working Papers GPRG-WPS-052, University of Oxford, Department of Economics.
  11. Marisa Coetzee, 2011. "Finding the Benefits: Estimating the Impact of the South African Child Support Grant," Working Papers 16/2011, Stellenbosch University, Department of Economics.
  12. Fernanda, ESTEVAN & Jean-Marie, BALAND, 2005. "Mortality risks and child labor," Discussion Papers (ECON - Département des Sciences Economiques) 2005040, Université catholique de Louvain, Département des Sciences Economiques.
  13. Servaas van der Berg & Megan Louw, 2007. "Lessons learnt from SACMEQII: South African student performance in regional context," Working Papers 16/2007, Stellenbosch University, Department of Economics.
  14. Asli Demirguc-Kunt & Ross Levine, 2009. "Finance and Inequality: Theory and Evidence," NBER Working Papers 15275, National Bureau of Economic Research, Inc.

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