Attitude to schooling, wage premium and child labour

Purpose - The purpose of this paper is to analyse the incidence of child labour in developing countries, focusing on the role of parental attitude towards education combined with the returns to education in deciding between child labour and child education. Design/methodology/approach - Using an inter‐temporal decision making framework, it is assumed that parents decide on the extent of schooling for their children. Findings - Though education enhances the productivity of a worker and thereby increases the wage of an educated worker, it was found that a portion of children drop out of school before completion and join the workforce as the returns from full schooling are not high enough. This happens even when parents intrinsically value education and also because of the wage premium, which is a strictly positive function of the time spent in school. The paper examines the effectiveness of standard policies like compulsory schooling or financial incentives in reducing the incidence of child labour and finds that the effects of some of the policies are ambiguous. Originality/value - The existing literature mainly focuses on poverty as the main reason for the incidence of child labour and usually views child labour through the lens of credit market imperfections. Unlike the existing literature, this paper emphasises the role of parental attitude towards education and the wage premium associated with schooling.