Poor women with children in Ecuador were selected at random for a cash transfer equivalent to 7 percent of monthly expenditures. The transfer is greater than the increase in schooling costs at the end of primary school, but it is less than 20 percent of median child labor earnings in the labor market. Poor families with children in school at the time of the award use the extra income to postpone the child’s entry into the labor force. Students in families induced to take-up the cash transfer by the experiment reduce their involvement in paid employment by 78 percent and unpaid economic activity inside their home by 32 percent.
Their research highlights the unpleasant fact that child labor is usually driven by grim economic circumstances: “Our findings highlight the central role that poverty plays in the child labor decision, and suggest the possibility of effecting large changes in child labor with relatively modest investments in poverty relief.” (HT: Chris Blattman)