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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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  • 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. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
  2. repec:fth:inadeb:301 is not listed on IDEAS
  3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  4. Alan Krueger, 1996. "Observations on International Labor Standards and Trade," Working Papers 741, Princeton University, Department of Economics, Industrial Relations Section..
  5. Ranjan, P., 1999. ""Credit Constraints and the Phenomenon of Child Labor"," Papers 98-99-12, California Irvine - School of Social Sciences.
  6. 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.
  7. 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.
  8. 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.
  9. Basu, Kaushik, 1998. "Child labor : cause, consequence, and cure, with remarks on International Labor Standards," Policy Research Working Paper Series 2027, The World Bank.
  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. 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.
  12. 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.
  13. Eric Edmonds & Nina Pavcnik, 2002. "Does Globalization Increase Child Labor? Evidence from Vietnam," NBER Working Papers 8760, National Bureau of Economic Research, Inc.
  14. repec:fth:prinin:362 is not listed on IDEAS
  15. Canagarajah, Sudharshan & Coulombe, Harold, 1997. "Child labor and schooling in Ghana," Policy Research Working Paper Series 1844, The World Bank.
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Citations

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Cited by:
  1. Calero, Carla & Bedi, Arjun S. & Sparrow, Robert, 2008. "Remittances, Liquidity Constraints and Human Capital Investments in Ecuador," IZA Discussion Papers 3358, Institute for the Study of Labor (IZA).
  2. Frederic Mishkin, 2005. "Is Financial Globalization Beneficial?," NBER Working Papers 11891, National Bureau of Economic Research, Inc.
  3. Abdel Aal Mahmoud, Ashraf, 2010. "FDI, local Financial Markets, employment and poverty alleviation," MPRA Paper 23608, University Library of Munich, Germany, revised Jul 2010.
  4. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
  5. 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.
  6. repec:rdg:wpaper:em-dp2004-21 is not listed on IDEAS
  7. AL-Qudsi, Sulayman S., 2003. "Family background, school enrollments and wastage: evidence from Arab countries," Economics of Education Review, Elsevier, vol. 22(6), pages 567-580, December.
  8. Honohan, Patrick, 2006. "Household Financial Assets in the Process of Development," Working Paper Series RP2006/91, World Institute for Development Economic Research (UNU-WIDER).
  9. 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.

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