Child Labor: A Microeconomic Perspective

In an empirical microeconomic analysis that allows individual heterogeneity, we test four main hypotheses from the recent macroeconomic literature on child labor: the substitution, subsistence, capital market and parental education hypotheses. Using two rich Indian data sets, we find that the reduction in child labor and/or non-school-enrollment from 1987/88 to 1993/94 is closely associated with the increased household incomes. However, reduced capital constraints and improved literacy rates among the parent generation also play minor roles in increasing enrollment rates. A small counteracting effect comes from an increased need for and an increased value of substituting children for working household heads.