In poor rural communities across the developing world, where income levels are low and turbulent, and financial and labour markets are imperfect, schooling rates are low and school absence is high. This can partially be due to the occurrence of child labour, which is used as a means of smoothing household consumption and/or keeping it above subsistence. Our paper provides direct evidence on the effect of relaxing financial and labour markets constraints on child labour and schooling in Mozambique. The effects are identifed through a randomized control trial (RCT), which introduced an income-pooling program (Village Saving and Loan Associations, VSLA), and a labour-pooling program (Ajuda Mutua, AM) in a rural region in the North-East Mozambique with underdeveloped financial and labour markets. We find that both VSLA and AM (and their combination) increase school attendance, while only AM decreases child labour. We propose that, by engendering income smoothing, relaxing financial and labour market constraints makes child labour less necessary, which increases school attendance. However, relaxing financial constraints can also lead households to expand their income generating activities, which can then increase their demand of child labour. In contrast, relaxing labour market constraints does not lead to such an unwanted consequence. No effects are found for school enrolment. This is potentially because it is a longer term outcome, not yet affected by either program.
Presented by:
Laura Fumagalli (ISER)
Date & time:
May 13, 2015 11:00 am - May 13, 2015 12:00 pm
Venue:
Large Seminar Room (2N2.4.16)
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