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Child labor : the role of income variability and access to credit in a cross-section of countries

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Author Info

  • Dehejia, Rajeev H.
  • Gatti, Roberta

Abstract

Even though access to credit is central to child labor theoretically, little work has been done to assess its importance empirically. Dehejia and Gatti examine the link between access to credit and child labor at a cross-country level. The authors measure child labor as a country aggregate, and proxy credit constraints by the level of financial market development. These two variables display a strong negative (unconditional) relationship. The authors show that even after they control for a wide range of variables-including GDP per capita, urbanization, initial child labor, schooling, fertility, legal institutions, inequality, and openness-this relationship remains strong and statistically significant. Moreover, they find that, in the absence of developed financial markets, households resort to child labor to cope with income variability. This evidence suggests that policies aimed at increasing households'access to credit could be effective in reducing child labor.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2767.

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Date of creation: 31 Jan 2002
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Handle: RePEc:wbk:wbrwps:2767

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Related research

Keywords: Environmental Economics&Policies; Labor Policies; Children and Youth; Health Economics&Finance; Economic Theory&Research; Street Children; Environmental Economics&Policies; Youth and Governance; Children and Youth; Health Economics&Finance;

References

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  1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
  2. Gupta, Manash Ranjan, 2000. "Wage Determination of a Child Worker: A Theoretical Analysis," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 219-28, June.
  3. Kaushik Basu, 1999. "Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1083-1119, September.
  4. Canagarajah, Sudharshan & Coulombe, Harold, 1997. "Child labor and schooling in Ghana," Policy Research Working Paper Series 1844, The World Bank.
  5. Beck, T.H.L. & Demirgüç-Kunt, A. & Levine, R., 2000. "A new database on financial development and structure," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125518, Tilburg University.
  6. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  7. Ranjan, P., 1999. ""Credit Constraints and the Phenomenon of Child Labor"," Papers 98-99-12, California Irvine - School of Social Sciences.
  8. Jacoby, Hanan G & Skoufias, Emmanuel, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 311-35, July.
  9. Jean-Marie Baland & James A. Robinson, 2000. "Is Child Labor Inefficient?," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 663-679, August.
  10. Flug, Karnit & Spilimbergo, Antonio & Wachtenheim, Erik, 1998. "Investment in education: do economic volatility and credit constraints matter?," Journal of Development Economics, Elsevier, vol. 55(2), pages 465-481, April.
  11. Eric Edmonds & Nina Pavcnik, 2002. "Does Globalization Increase Child Labor? Evidence from Vietnam," NBER Working Papers 8760, National Bureau of Economic Research, Inc.
  12. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  13. Bourguignon, F. & Browning, M. & Chiappori, P. A., 1995. "The Collective Approach to Household Behaviour," DELTA Working Papers 95-04, DELTA (Ecole normale supérieure).
  14. Alan Krueger, 1996. "Observations on International Labor Standards and Trade," Working Papers 741, Princeton University, Department of Economics, Industrial Relations Section..
  15. repec:fth:prinin:362 is not listed on IDEAS
  16. Parsons, Donald O & Goldin, Claudia, 1989. "Parental Altruism and Self-Interest: Child Labor among Late Nineteenth-Century American Families," Economic Inquiry, Western Economic Association International, vol. 27(4), pages 637-59, October.
  17. repec:fth:inadeb:301 is not listed on IDEAS
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Citations

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Cited by:
  1. Frederic Mishkin, 2005. "Is Financial Globalization Beneficial?," NBER Working Papers 11891, National Bureau of Economic Research, Inc.
  2. Abdelaal Mahmoud, Ashraf, 2010. "FDI, local Financial Markets, Employment and poverty alleviation," MPRA Paper 29717, University Library of Munich, Germany.
  3. Honohan, Patrick, 2006. "Household Financial Assets in the Process of Development," Working Papers RP2006/91, World Institute for Development Economic Research (UNU-WIDER).
  4. Calero, C. & Bedi, A.S. & Sparrow, R.A., 2008. "Remittances, liquidity constraints and human capital investments in Ecuador," ISS Working Papers - General Series 1765018735, International Institute of Social Studies of Erasmus University (ISS), The Hague.
  5. Eric V. Edmonds, 2004. "Does Illiquidity Alter Child Labor and Schooling Decisions? Evidence from Household Responses to Anticipated Cash Transfers in South Africa," NBER Working Papers 10265, National Bureau of Economic Research, Inc.
  6. Christian Lehmann & Guilherme Issamu Hirata, 2010. "Unintended Effects of Microfinance: An Increase in Child Labour in Some Contexts?," One Pager 108, International Policy Centre for Inclusive Growth.
  7. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.

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