Household Choices of Child Labor and Schooling: A Simple Model With Application to Brazil

34 Pages Posted: 5 Feb 2007

See all articles by Diana I. Kruger

Diana I. Kruger

Pontifical Catholic University of Valparaiso; IZA Institute of Labor Economics

Rodrigo R. Soares

Columbia University - School of International & Public Affairs (SIPA); Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics; IZA Institute of Labor Economics

Matias Berthelon

University of Maryland - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 2006

Abstract

This paper develops and estimates a simple structural model of household decisions regarding child labor and schooling. We argue that part of the conflicting results from the previous literature - related to the effect of improvements in economic conditions on child labor - derives from the different income and substitution effects implicit in different types of income variation. Our model leads to an empirical specification where income and substitution effects can be clearly identified. We apply our model to Brazil and use agricultural shocks to local economic activity (coffee and overall agricultural production) to distinguish between the effects of increases in household income and increases in the opportunity cost of children's time. The results show that higher parental wages and household wealth are associated with lower child labor and higher school attendance. Nevertheless, conditional on family income and socioeconomic status, exogenous temporary increases in local economic activity are associated with increased opportunity cost of children's time and, therefore, higher child labor and lower schooling. The results reconcile economic theory with seemingly contradictory evidence from the previous empirical literature.

Keywords: child labor, schooling, generalized ordered logit, Brazil, coffee

JEL Classification: D13, J22, 012

Suggested Citation

Kruger, Diana I. and Soares, Rodrigo R. and Berthelon, Matias, Household Choices of Child Labor and Schooling: A Simple Model With Application to Brazil (December 2006). Available at SSRN: https://ssrn.com/abstract=960949 or http://dx.doi.org/10.2139/ssrn.960949

Diana I. Kruger (Contact Author)

Pontifical Catholic University of Valparaiso ( email )

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IZA Institute of Labor Economics

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Rodrigo R. Soares

Columbia University - School of International & Public Affairs (SIPA) ( email )

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New York, NY 10027
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Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics ( email )

Rua Itapeva 474 s.1202
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Brazil

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Matias Berthelon

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

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