Does Illiquidity Alter Child Labor and Schooling Decisions? Evidence from Household Responses to Anticipated Cash Transfers in South Africa / Eric V. Edmonds.

By:

Edmonds, Eric V

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National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w10265.Publication details: Cambridge, Mass. National Bureau of Economic Research 2004.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This study considers the response of child labor supply and schooling attendance to anticipated social pension income in South Africa. For black households in South Africa, the social pension is large, highly anticipated, and shared across generations. Moreover, pension benefits are largely determined by age in South Africa's extremely poor black population, and this study uses the age discontinuity in the pension benefit formula for identification. The South African social pension thus presents an unusually clean test of the applicability of the Life-Cycle/Permanent Income model to child labor and schooling decisions in developing countries. In the present case, the data support the theory that liquidity constraints contribute to high levels of child labor. When households become eligible for the social pension in South Africa, the resulting increase in household non-labor income is associated with a sizeable decline in child labor and increases in schooling. Changes in child labor and schooling are largest among pensioners with little formal education. This finding suggests that the current emphasis in development policy of addressing child labor by attacking labor demand may be misdirected.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w10265 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

February 2004.

This study considers the response of child labor supply and schooling attendance to anticipated social pension income in South Africa. For black households in South Africa, the social pension is large, highly anticipated, and shared across generations. Moreover, pension benefits are largely determined by age in South Africa's extremely poor black population, and this study uses the age discontinuity in the pension benefit formula for identification. The South African social pension thus presents an unusually clean test of the applicability of the Life-Cycle/Permanent Income model to child labor and schooling decisions in developing countries. In the present case, the data support the theory that liquidity constraints contribute to high levels of child labor. When households become eligible for the social pension in South Africa, the resulting increase in household non-labor income is associated with a sizeable decline in child labor and increases in schooling. Changes in child labor and schooling are largest among pensioners with little formal education. This finding suggests that the current emphasis in development policy of addressing child labor by attacking labor demand may be misdirected.