Credit and Child Labor Complementarity in the Wake of Natural Disaster: Evidence from Indonesia

Michell Yoonjei Dong and Hee-Seung Yang ()
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Michell Yoonjei Dong: Green Climate Fund

No 2024rwp-235, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: This paper examines the impact of an earthquake in Indonesia on children’s school and work activities and how that relationship differs by access to credit. We find that the earthquake decreases educational attainment while increasing child labor and the effect is stronger for households with access to credit. Following the 2006 Yogyakarta earthquake, years of schooling for earthquake-affected children aged 7-14 decreased by 0.5 years, but the effect was stronger for those living close to a microfinance institution. Heterogeneity in treatment effects suggests that the opportunity cost of schooling increases as households with micro-loans open up businesses. Our finding indicates the complementary effect between credit and child labor and suggests the need for policies to increase educational investment when providing micro-loans to help households affected by shocks.

Keywords: natural disaster; earthquake; education; child labor; microfinance; Indonesia (search for similar items in EconPapers)
JEL-codes: H81 I20 J13 O12 (search for similar items in EconPapers)
Pages: 38pages
Date: 2024-12
New Economics Papers: this item is included in nep-dev, nep-fdg, nep-lab, nep-sea and nep-ure
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