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Credit and Child Labor Complementarity in the Wake of Natural Disaster: Evidence from Indonesia

Author

Listed:
  • Michell Yoonjei Dong

    (Green Climate Fund)

  • Hee-Seung Yang

    (Yonsei University)

Abstract

This paper examines the impact of an earthquake in Indonesia on children’s school and work activities and how that relationship differs by access to credit. We find that the earthquake decreases educational attainment while increasing child labor and the effect is stronger for households with access to credit. Following the 2006 Yogyakarta earthquake, years of schooling for earthquake-affected children aged 7-14 decreased by 0.5 years, but the effect was stronger for those living close to a microfinance institution. Heterogeneity in treatment effects suggests that the opportunity cost of schooling increases as households with micro-loans open up businesses. Our finding indicates the complementary effect between credit and child labor and suggests the need for policies to increase educational investment when providing micro-loans to help households affected by shocks.

Suggested Citation

  • Michell Yoonjei Dong & Hee-Seung Yang, 2024. "Credit and Child Labor Complementarity in the Wake of Natural Disaster: Evidence from Indonesia," Working papers 2024rwp-235, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2024rwp-235
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    More about this item

    Keywords

    natural disaster; earthquake; education; child labor; microfinance; Indonesia;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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