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Child Labor: The Role of Income Variability and Access to Credit Across Countries

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Author Info
Rajeev Dehejia
Roberta Gatti

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Abstract

This paper examines the relationship between child labor and access to credit at a cross-country level. Even though this link is theoretically central to child labor, so far there has been little work done to assess its importance empirically. We measure child labor as a country aggregate, and credit constraints are proxied by the extent of financial development. These two variables display a strong negative relationship, which we show is robust to selection on observables (by controlling for a wide range of variables such as GDP per capita, urbanization, initial child labor, schooling, fertility, legal institutions, inequality, and openness, and by allowing for a nonparametric functional form), and to selection on unobservables (by allowing for fixed effects). We find that the magnitude of the association between our proxy of access to credit and child labor is large in the sub-sample of poor countries. Moreover, in the absence of developed financial markets, households appear to resort substantially to child labor in order to cope with income variability. This evidence suggests that policies aimed at widening households' access to credit could be effective in reducing the extent of child labor.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9018.

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Date of creation: Jun 2002
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Handle: RePEc:nbr:nberwo:9018

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Find related papers by JEL classification:
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
G1 - Financial Economics - - General Financial Markets

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  2. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank. [Downloadable!]
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    Other versions:
  4. Beck, Thorsten & Asl Demirguc-Kunt & Maksimovic, Vojislav, 2002. "Financing patterns around the world : the role of institutions," Policy Research Working Paper Series 2905, The World Bank. [Downloadable!]
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  16. Parsons, Donald O & Goldin, Claudia, 1989. "Parental Altruism and Self-Interest: Child Labor among Late Nineteenth-Century American Families," Economic Inquiry, Oxford University Press, vol. 27(4), pages 637-59, October.
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  21. Jacoby, Hanan G, 1994. "Borrowing Constraints and Progress through School: Evidence from Peru," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 151-60, February. [Downloadable!] (restricted)
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  26. Eric Edmonds & Nina Pavcnik, 2002. "Does Globalization Increase Child Labor? Evidence from Vietnam," NBER Working Papers 8760, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Uma S. Kambhampati & Raji Rajan, 2004. "The 'Nowhere' Children: Patriarchy and the Role of Girls in India's Rural Economy," Economics & Management Discussion Papers em-dp2004-21, Henley Business School, Reading University. [Downloadable!]
    Other versions:
  2. Eric Edmonds & Nina Pavcnik, 2004. "International Trade and Child Labor: Cross-Country Evidence," NBER Working Papers 10317, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Fares, Jean & Raju, Dhushyanth, 2007. "Child labor across the developing world : patterns and correlations," Policy Research Working Paper Series 4119, The World Bank. [Downloadable!]
  4. Gautam Hazarika & Sudipta Sarangi, 2005. "Household Access to Microcredit and Child Work in Rural Malawi," IZA Discussion Papers 1567, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Helene Bie Lilleør, 2008. "Can Future Uncertainty Keep Children Out of School?," CAM Working Papers 2008-06, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
  6. repec:ese:iserwp: is not listed on IDEAS
  7. Kathleen Beegle & Rajeev Dehejia & Roberta Gatti, 2003. "Child Labor, Crop Shocks, and Credit Constraints," NBER Working Papers 10088, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Del Carpio, Ximena V., 2008. "Does child labor always decrease with income ? an evaluation in the context of a development program in Nicaragua," Policy Research Working Paper Series 4694, The World Bank. [Downloadable!]
  9. Shunsuke Sakamoto, 2006. "Parental Attitudes toward Children and Child Labor: Evidence from Rural India," Hi-Stat Discussion Paper Series d05-136, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  10. Eliana Cardoso & Andre Portela Souza, 2004. "The Impact of Cash Transfers on Child Labor and School Attendance in Brazil," Working Papers 0407, Department of Economics, Vanderbilt University. [Downloadable!]
  11. Hazel Jean Malapit & Jade Eric Redoblado & Deanna Margarett Cabungcal-Dolor & Jasmin Suministrado, 2006. "Labor Supply Responses to Adverse Shocks under Credit Constraints: Evidence from Bukidnon, Philippines," Cahiers de recherche PMMA 2006-15, PEP-PMMA. [Downloadable!]
  12. Dehejia, Rajeev H. & Beegle, Kathleen & Gatti, Roberta, 2003. "Child labor, income shocks, and access to credit," Policy Research Working Paper Series 3075, The World Bank. [Downloadable!]
  13. Sonia Bhalotra, 2003. "Is Child Work Necessary?," Bristol Economics Discussion Papers 03/554, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
  14. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2002. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," Working Papers 486, Research Seminar in International Economics, University of Michigan. [Downloadable!]
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  15. Agus Priyambada & Asep Suryahadi & Sudarno Sumarto, 2002. "What Happened to Child Labor in Indonesia during the Economic Crisis? The Trade-off between School and Work," Labor Economics Working Papers 87, East Asian Bureau of Economic Research. [Downloadable!]
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  17. Kathleen Beegle & Rajeev H. Dehejia & Roberta Gatti, 2002. "Do households resort to child labor to cope with income shocks?," Discussion Papers 0203-12, Columbia University, Department of Economics. [Downloadable!]
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