Policy Seed Grant | 2002-2003
Child Labor and Access to Credit
by Rajeev Dehejia (Economics)
This project examines the role of access to credit as an effective policy tool for fighting child labor and poverty. Using detailed household panel data from Tanzania and Vietnam, we investigate the impact of access to credit (defined as the combinations of collateralizable assets at the household level and informal and formal lending sources at the village level) on the time allocation decisions for child labor and schooling. Second, we analyze whether families resort to child labor as a mechanism to cope with income shocks (both household and community shocks) and whether these shocks are associated with a reduction in school attendance. In this context, we study whether the presence of formal and informal financial institutions and the relative availability of credit allows household to offset the effects of shocks.
Although a significant strant of theoretical literature indicates that the availability of credit is an important determinant of inefficiently high child labor, none of the empirical studies in the literature explicitly addresses the role of risk insurance or access to credit for child labor. Nonetheless, improving households' ability to insure against income shocks through increased access to credit is often proposed as a policy instruments whch will influence child labor.
The structure of the data we propose to use (panel, with four rounds of survey in Tanzania) and the detailed information contained on time allocation afford us a unique opportunity to investigate these issues. This project will be undertaken by Rajeev Dehejia, with collaboration from Roberta Gatti (Development Research Group, The World Bank).
