DP5972 Mortality Risks, Education and Child Labour

Author(s): Jean-Marie Baland , Fernanda Estevan

Publication Date: December 2006

Keyword(s): child labour , education , mortality risks , old-age security motive , conditional cash transfers

JEL(s): D13 , D81 , H31 , I00 , O12

Programme Areas: Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP5972.asp.asp

In this paper, we investigate the role of young adult mortality on child labour and educational decisions. We argue that mortality risks are a major source of risks in returns to education in developing countries. We show that, in the absence of appropriate insurance mechanisms, the level of child labour is inefficient, but it can be too high or too low. It is too high when parents are not very altruistic or anticipate positive transfers from their children in the future. Uncertain returns to education, endogenous mortality or imperfect capital markets unambiguously increase child labour. When the level of child labour is inefficiently high, we also show that a cash transfer conditional on child's schooling can always restore efficiency regarding child labour.