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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.

Suggested Citation

  • Dehejia, Rajeev H. & Gatti, Roberta, 2002. "Child labor : the role of income variability and access to credit in a cross-section of countries," Policy Research Working Paper Series 2767, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2767
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    References listed on IDEAS

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    3. Abdelaal Mahmoud, Ashraf, 2010. "FDI, local Financial Markets, Employment and poverty alleviation," MPRA Paper 29717, University Library of Munich, Germany.
    4. Bandara, Amarakoon & Dehejia, Rajeev & Lavie-Rouse, Shaheen, 2015. "The Impact of Income and Non-Income Shocks on Child Labor: Evidence from a Panel Survey of Tanzania," World Development, Elsevier, vol. 67(C), pages 218-237.
    5. Simeon Maxime Bikoue, 2021. "Determinants of Child Labour in Cameroon: A Bivariate Probit Model Analysis," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 9(2), pages 105-121, June.
    6. Angela Cipollone, 2011. "Education as a Precautionary Asset," Working Papers CELEG 1108, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    7. Kharisma, Bayu, 2017. "Idiosyncratic Shocks, Child Labor and School Attendance in Indonesia," MPRA Paper 78887, University Library of Munich, Germany, revised 06 Apr 2017.
    8. Domenica Federico & Maria Adele Milioli & Antonella Notte & Lucia Poletti, 2020. "Financial and Social Inclusion and Financial Sector Development: An Outline in the EU28," American Journal of Economics and Business Administration, Science Publications, vol. 12(1), pages 14-35, January.
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    10. Eliana Cardoso & Andre Portela Souza, 2004. "The Impact of Cash Transfers on Child Labor and School Attendance in Brazil," Vanderbilt University Department of Economics Working Papers 0407, Vanderbilt University Department of Economics.
    11. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
    12. Rizzo, Matteo., 2011. "Rural wage employment in Rwanda and Ethiopia : a review of the current policy neglect and a framework to begin addressing it," ILO Working Papers 994645243402676, International Labour Organization.
    13. Alessandro Maffei & Nikolai Raabe & Heinrich W. Ursprung, 2006. "Political Repression and Child Labour: Theory and Empirical Evidence," The World Economy, Wiley Blackwell, vol. 29(2), pages 211-239, February.
    14. Cagé, Julia, 2009. "Growth, Poverty Reduction and Governance in Developing Countries: a Survey," CEPREMAP Working Papers (Docweb) 0904, CEPREMAP.
    15. repec:rdg:wpaper:em-dp2004-21 is not listed on IDEAS
    16. Lanzona, Leonardo & Aldaba, Fernando T. & Tamangan, Ronald J., 2006. "An Empirical Analysis on the Tradeoff between Schooling and Child Labor in the Philippines," Philippine Journal of Development PJD 2004 Vol. XXXI No. 2-, Philippine Institute for Development Studies.
    17. Calero, Carla & Bedi, Arjun S. & Sparrow, Robert, 2009. "Remittances, Liquidity Constraints and Human Capital Investments in Ecuador," World Development, Elsevier, vol. 37(6), pages 1143-1154, June.
    18. Patrick Honohan, 2006. "Household Financial Assets in the Process of Development," WIDER Working Paper Series RP2006-91, World Institute for Development Economic Research (UNU-WIDER).
    19. Christian Lehmann & Guilherme Issamu Hirata, "undated". "Unintended Effects of Microfinance: An Increase in Child Labour in Some Contexts?," One Pager 108, International Policy Centre for Inclusive Growth.
    20. Abdel-Latif, Hany & Murphy, Phil & Ouattara, Bazoumana, 2016. "Global financial crisis, credit access and children: Evidence from Tanzania," MPRA Paper 83577, University Library of Munich, Germany.
    21. 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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