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

  • Dehejia, Rajeev H.
  • Gatti, Roberta

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.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2767.

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Date of creation: 31 Jan 2002
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Handle: RePEc:wbk:wbrwps:2767
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  1. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  2. 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.
  3. Parsons, Donald O & Goldin, Claudia, 1989. "Parental Altruism and Self-Interest: Child Labor among Late Nineteenth-Century American Families," Economic Inquiry, Western Economic Association International, vol. 27(4), pages 637-59, October.
  4. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
  5. 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.
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  7. Alan Krueger, 1996. "Observations on International Labor Standards and Trade," Working Papers 741, Princeton University, Department of Economics, Industrial Relations Section..
  8. Canagarajah, Sudharshan & Coulombe, Harold, 1997. "Child labor and schooling in Ghana," Policy Research Working Paper Series 1844, The World Bank.
  9. repec:pri:indrel:362 is not listed on IDEAS
  10. 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.
  11. Gupta, Manash Ranjan, 2000. "Wage Determination of a Child Worker: A Theoretical Analysis," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 219-28, June.
  12. Ranjan, P., 1999. ""Credit Constraints and the Phenomenon of Child Labor"," Papers 98-99-12, California Irvine - School of Social Sciences.
  13. Alan B. Krueger, 1996. "Observations on International Labor Standards and Trade," NBER Working Papers 5632, National Bureau of Economic Research, Inc.
  14. Eric Edmonds & Nina Pavcnik, 2002. "Does Globalization Increase Child Labor? Evidence from Vietnam," NBER Working Papers 8760, National Bureau of Economic Research, Inc.
  15. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 1999. "A new database on financial development and structure," Policy Research Working Paper Series 2146, The World Bank.
  16. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 311-335.
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