Working Paper: CEPR ID: DP5972
Authors: Fernanda Estevan; Jean-Marie Baland
Abstract: In this paper, we investigate the role of young adult mortality on child labour and educational decisions. We argue that mortality risks are a major source of risks in returns to education in developing countries. We show that, in the absence of appropriate insurance mechanisms, the level of child labour is inefficient, but it can be too high or too low. It is too high when parents are not very altruistic or anticipate positive transfers from their children in the future. Uncertain returns to education, endogenous mortality or imperfect capital markets unambiguously increase child labour. When the level of child labour is inefficiently high, we also show that a cash transfer conditional on child's schooling can always restore efficiency regarding child labour.
Keywords: Child labour; Conditional cash transfers; Education; Mortality risks; Old-age security motive
JEL Codes: D13; D81; H31; I00; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| young adult mortality risks (I12) | child labour (J82) |
| high mortality rates (I12) | immediate income from child labour (J82) |
| high mortality rates (I12) | uncertain future returns from education (I26) |
| parental altruism (D64) | child labour levels (J82) |
| cash transfers conditional on schooling (H52) | efficiency in child labour decisions (J82) |
| child labour (J82) | future earnings (J17) |