Credit Markets and Child
Labour The Effect of Shocks, Credit Rationing, and Insurance
Access to credit markets and the risk faced by the household can have effects on the time use of children. The authors test whether credit rationed households and households that do not have access to risk management instruments, like insurance, are less likely to invest in their children’s human capital. They also use information about the occurrence of shocks to assess the role of negative shocks in determining child labour supply. The results indicate that shocks exert a large influence on children’s labour supply, and that access to insurance and credit markets is important, especially in determining investment in the children’s human capital. This evidence indicates that polices aimed at reducing the risk faced by the household or guaranteeing access to risk-coping instruments can be very effective in reducing child labour, and increasing school enrolment.
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