Working Paper: NBER ID: w27241
Authors: Natalie Bau; Martin Rotemberg; Manisha Shah; Bryce Steinberg
Abstract: Policies that improve early life human capital are a promising tool to alter disadvantaged children’s lifelong trajectories. Yet in many low-income countries, children and their parents face tradeoffs between schooling and productive work. If there are positive returns to human capital in child labor, then children who receive greater early life investments may attend less school. Exploiting early life rainfall shocks in India as a source of exogenous variation in early life investment, we show that child labor attenuates the positive effects of early life investment, and increased early life investment increases school dropout in districts with high child labor. This lower educational investment has persistent long-term consequences into adulthood, resulting in lower household consumption. We show that our results are robust to instrumenting for child labor prevalence using local crop mix. Reductions in educational investment in response to positive early life shocks appear to reduce overall welfare in high child labor districts.
Keywords: human capital; child labor; early life investment; educational outcomes
JEL Codes: I20; J10; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased early life investments (J13) | Higher dropout rates in districts with high child labor prevalence (I21) |
| Positive rainfall shocks (Q54) | Increased early life investments (J13) |
| Increased early life investments (J13) | Lower household consumption in adulthood (D15) |
| Higher dropout rates in districts with high child labor prevalence (I21) | Lower household consumption in adulthood (D15) |
| Positive rainfall shocks (Q54) | Reductions in educational attainment in high child labor areas (I21) |