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Household Vulnerability and Child Labour: the Effect of Shocks, Credit Rationing and Insurance

Building upon the social-risk management approach, this paper examines dimensions of household behavior that are important for risk management and reduction of vulnerability, beyond issues of consumption. This paper attempts to assess to what extent risk and vulnerability factors are relevant for household decisions concerning children's school attendance and labor supply. Particular focus has been given to the evaluation of the effect of shocks, credit rationing and insurance on household decisions concerning children's activities. On the basis of a theoretical approach based on well known results relative to human capital investment decision and children's labor supply, the paper developed an estimation strategy that allows an assessment of the importance of a set of risk factors. Because of the potential endogeneity of the variable of interest, methodology based on propensity scores was applied. The analysis of the distribution of propensity scores for the "treated" and "not treated" population for the population of interest allow the conclusion that, given the maintained hypothesis of unconfoudness on observables, casual inference can be safely drawn from these estimates. Also computed is the ATE that confirms the main results obtained through the regression analysis: which indicates that credit rationing is extremely important in determining the household's decision to invest in the human capital of the children.

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Paper provided by Understanding Children's Work (UCW Programme) in its series UCW Working Paper with number 3.

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Date of creation: Nov 2002
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Handle: RePEc:ucw:worpap:3
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  1. Eric Edmonds, 2007. "Child Labor," Working Papers id:988, eSocialSciences.
  2. Gary S. Becker & Nigel Tomes, 1976. "Child Endowments, and the Quantity and Quality of Children," NBER Working Papers 0123, National Bureau of Economic Research, Inc.
  3. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  4. Mealli, Fabrizia & Rubin, Donald B., 2003. "Assumptions allowing the estimation of direct causal effects," Journal of Econometrics, Elsevier, vol. 112(1), pages 79-87, January.
  5. Joshua Angrist & Alan Krueger, 1998. "Empirical Strategies in Labor Economics," Working papers 98-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Cigno, Alessandro & Rosati, Furio Camillo, 2005. "The Economics of Child Labour," OUP Catalogue, Oxford University Press, number 9780199264452, March.
  7. Björklund, Anders, 1983. "Estimation of Wage Gains and Welfare Gains from Self-Selection Models," Working Paper Series 105, Research Institute of Industrial Economics.
  8. Bjorklund, Anders & Moffitt, Robert, 1987. "The Estimation of Wage Gains and Welfare Gains in Self-selection," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 42-49, February.
  9. Cigno, Alessandro & Rosati, Furio C. & Tzannatos, Zafiris, 2002. "Child labor handbook," Social Protection Discussion Papers 25507, The World Bank.
  10. Manski, Charles F, 1990. "Nonparametric Bounds on Treatment Effects," American Economic Review, American Economic Association, vol. 80(2), pages 319-23, May.
  11. 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.
  12. Dehejia, Rajeev H. & Beegle, Kathleen & Gatti, Roberta, 2003. "Child labor, income shocks, and access to credit," Policy Research Working Paper Series 3075, The World Bank.
  13. Beegle, Kathleen & Dehejia, Rajeev H. & Gatti, Roberta, 2006. "Child labor and agricultural shocks," Journal of Development Economics, Elsevier, vol. 81(1), pages 80-96, October.
  14. Sascha O. Becker & Andrea Ichino, 2002. "Estimation of average treatment effects based on propensity scores," Stata Journal, StataCorp LP, vol. 2(4), pages 358-377, November.
  15. Pratt, John W. & Schlaifer, Robert, 1988. "On the interpretation and observation of laws," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 23-52.
  16. Jalan, Jyotsna & Ravallion, Martin, 2003. "Estimating the Benefit Incidence of an Antipoverty Program by Propensity-Score Matching," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 19-30, January.
  17. Rajeev Dehejia & Roberta Gatti, 2002. "Child Labor: The Role of Income Variability and Access to Credit Across Countries," NBER Working Papers 9018, National Bureau of Economic Research, Inc.
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