Environmental Shocks and Child Labor: A Panel Data Ethiopia & India

Environmental shocks, particularly high impact natural disasters, force children into the labor market to meet the basic survival needs in straitened times. Currently India has the largest number of child labor in the world while the disaster-prone African economy of Ethiopia is experiencing a surge in child labor. Using Young Lives Longitudinal Survey Data on Ethiopia and India covering 2002-2016, this paper examines the dynamics between child labor and environmental shocks, employing different panel data models of child labor supply. The paper has two notable features. First, it uses the Young Lives Survey Datasets (2020), a data set rich on child welfare information not previously explored. Second, it employs the panel-data fix and random effects estimators to analyze the impact of environmental shocks on child labor, to our knowledge, a first attempt of its kind to deal with observable and unobservable endogenous time-invariant influences on child labor supply. We control for a relatively large set of child, household and community levels covariates, and obtain robust, statistically significant evidence of the positive impact of climate disaster on the incidence and amount of child labor in both Ethiopia and India and in all different models employed. We also report strong negative effects of link between child education and child labor, and some less clear evidence of the negative link between child health (stunning and obesity) and child labor. The evidence presented indicate that the traditional public policy devises like parents' education and inadequate social safety programs do not make statistically robust contribution to reducing child labor supply in face of environmental disasters, suggesting income gains from such programs are not sufficient to meet the survival needs of poor households and hence to prevent child labor.