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

Rajeev Dehejia () and Roberta Gatti ()

No 2767, Policy Research Working Paper Series from The World Bank

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.

Keywords: Environmental Economics&Policies; Labor Policies; Children and Youth; Health Economics&Finance; Economic Theory&Research; Street Children; Environmental Economics&Policies; Youth and Governance; Children and Youth; Health Economics&Finance (search for similar items in EconPapers)
Date: 2002-01-31
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