The Income Elasticity of Child Labour: Do Cash Transfers Have an Impact on the Poorest Children?

33 Pages Posted: 1 Aug 2019

See all articles by Luca Pellerano

Luca Pellerano

International Labour Organization (ILO)

Eleonora Porreca

Bank of Italy - Research Department

Furio Camillo Rosati

University of Rome Tor Vergata

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Date Written: August 1, 2019

Abstract

The possible non linearity of the income elasticity of child labour has been at the centre of the debate regarding both its causes and the policy instruments to address it. We contribute to this debate providing theoretical and empirical novel results. From a theoretical point of view, for any given transfer size, there is a critical level of household income below which an increase in income has no impact on child labour and education. We estimate the causal impact of an increase in income on child labour and education exploiting the random allocation of the Child Grant Programme, an unconditional cash transfer, in Lesotho. We show that the poorest households do not increase investment in children’s human capital, while relatively less poor households reduce child labour and increase education. In policy terms, the results indicate that cash transfers might not be always effective to support the investment in children’s human capital of the poorest households. Beside the integration with other measures, making the amount of transfer depends of the level of deprivation of the household, might improve cash transfer effectiveness.

Keywords: child labour, education, cash transfer, randomized experiment, Lesotho

JEL Classification: H, C93, I28, J1, J24

Suggested Citation

Pellerano, Luca and Porreca, Eleonora and Rosati, Furio Camillo, The Income Elasticity of Child Labour: Do Cash Transfers Have an Impact on the Poorest Children? (August 1, 2019). CEIS Working Paper No. 466. Available at SSRN: https://ssrn.com/abstract=3430439 or http://dx.doi.org/10.2139/ssrn.3430439

Luca Pellerano

International Labour Organization (ILO) ( email )

Route des Morillons 4
Geneva, 1211
Switzerland

Eleonora Porreca

Bank of Italy - Research Department ( email )

Via Nazionale 91
00184 Roma
Italy

Furio Camillo Rosati (Contact Author)

University of Rome Tor Vergata

Via di Tor Vergata
Rome, Lazio 00133
Italy

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