Child Labor And Schooling Decisions In Urban And Rural Areas: Cross-Country Evidence

Child labor is widespread in developing countries, but its causes are debatable. Poverty is considered the primary reason, but many theoretical and empirical analyses show that other factors, such as access to credit, school quality and labor market opportunities, play equal or even greater roles in child labor and schooling decisions. This study surveys the existing literature and, taking into account urban-rural divides, aims to shed light on the debate with empirical evidence from Nepal, Peru, and Zimbabwe. We find that while there is strong evidence that poverty drives child labor in rural areas, there is a general lack of support for poverty hypothesis in urban areas. This suggests that policies such as a ban on child labor in rural areas could have an adverse effect, as child labor decisions are more likely a response to poverty and subsistence requirements. Similarly improving access to credit has greater potential for alleviating child labor and enhancing school enrollment in rural than urban areas, particularly in Nepal and Zimbabwe. On the other hand, the availability of alternative childcare options appears to considerably decrease child labor and create conditions for higher school attendance rates in urban than rural areas. Finally, the evidence from all three countries indicates that efforts to bolster adult educational levels and wages will help curb the prevalence and intensity of child labor and improve the likelihood that children stay in school.