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Household Preferences and Child Labor in Rural Ethiopia

Arnab K. Basu () and Ralitza Dimova ()
Additional contact information
Arnab K. Basu: Cornell University
Ralitza Dimova: University of Manchester

No 14062, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper revisits the causes behind child labor supply by focusing on an aspect that has received little attention: the link between the household head's risk and time preferences and observed child labor supply. We develop a theoretical model and empirically test for this causality using data from the seventh round of the Ethiopian Rural Household Survey. We find child labor to be increasing in both higher adult discount rates and higher degrees of risk aversion, and this finding is robust across alternative empirical approaches. Higher discount rates favor current consumption which is financed in part by child labor income while high risk aversion to future income (due to either low or uncertain returns to education) favor child labor at the expense of schooling.

Keywords: risk and time preferences; education; child labor; Ethiopia (search for similar items in EconPapers)
JEL-codes: C93 J43 O55 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2021-01
New Economics Papers: this item is included in nep-lma and nep-upt
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