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Child labor : the role of income variability and access to credit in a cross-section of countries

Author

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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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    1. Kaushik Basu, 1999. "Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1083-1119, September.
    2. Canagarajah, Sudharshan & Coulombe, Harold, 1997. "Child labor and schooling in Ghana," Policy Research Working Paper Series 1844, The World Bank.
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    8. Flug, Karnit & Spilimbergo, Antonio & Wachtenheim, Erik, 1998. "Investment in education: do economic volatility and credit constraints matter?," Journal of Development Economics, Elsevier, vol. 55(2), pages 465-481, April.
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    11. Gupta, Manash Ranjan, 2000. "Wage Determination of a Child Worker: A Theoretical Analysis," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 219-228, June.
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    Citations

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    Cited by:

    1. AL-Qudsi, Sulayman S., 2003. "Family background, school enrollments and wastage: evidence from Arab countries," Economics of Education Review, Elsevier, vol. 22(6), pages 567-580, December.
    2. Frederic S. Mishkin, 2007. "Is Financial Globalization Beneficial?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 259-294, March.
    3. 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.
    4. repec:rdg:wpaper:em-dp2004-21 is not listed on IDEAS
    5. Abdelaal Mahmoud, Ashraf, 2010. "FDI, local Financial Markets, Employment and poverty alleviation," MPRA Paper 29717, University Library of Munich, Germany.
    6. 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.
    7. 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.
    8. Angela Cipollone, 2011. "Education as a Precautionary Asset," Working Papers CELEG 1108, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    9. 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.
    10. Honohan, Patrick, 2006. "Household Financial Assets in the Process of Development," WIDER Working Paper Series 091, World Institute for Development Economic Research (UNU-WIDER).
    11. Christian Lehmann & Guilherme Issamu Hirata, 2010. "Unintended Effects of Microfinance: An Increase in Child Labour in Some Contexts?," One Pager 108, International Policy Centre for Inclusive Growth.
    12. Kharisma, Bayu, 2017. "Idiosyncratic Shocks, Child Labor and School Attendance in Indonesia," MPRA Paper 78887, University Library of Munich, Germany, revised 06 Apr 2017.
    13. 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.
    14. repec:ilo:ilowps:464524 is not listed on IDEAS
    15. 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.
    16. 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.
    17. Patrick Honohan, 2004. "Financial development, growth, and poverty: how close are the links?," Policy Research Working Paper Series 3203, The World Bank.
    18. 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.

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