increasing cases of child labour and school dropouts are loss to human capital. how ?
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This dissertation attempts to answer three critical questions that have remained largely misunderstood in the literature of child labor. The first question is whether child labor can help child laborers gain more human capital, including both formal education and health status. The second question focuses on the mechanisms through which child labor impacts human capital. It asks how a positive causal impact from child labor to human capital can possibly take place. The third question discusses policy implications. Given the gain in human capital of child laborers due to child labor, what are the unintended consequences of current policies and what can we do to effectively combat child labor and at the same time help child laborers acquire more human capital? Because these three questions are intrinsically related I find it more productive to present them in form of one major study rather than in three separate papers.
To provide empirical evidence to the first question of whether child labor can help child laborers gain more human capital, I exploit a quasi-controlled experiment that took place between 2004-2009 in a poor rural area in Vietnam. Most children in this area were so poor that they dropped out of school prematurely. In order to help these children sustain their education, a non-governmental organization (NGO) decided to provide a cow to each poor household with school-aged children so that the children could spend time tending the cows, earn some income to pay for their schooling. Practically this intervention provided the children a means to convert their time into income.
Due to limited resources, the NGO could provide cows to only a subset of the poor children, effectively creating a controlled experiment in which some of the children had work (the treatment group) and the others did not (the control group). Since the children were not randomized into the treatment and control groups, the main concern was the selection bias. An examination of the bias shows that the children were selected into the treatment group on the basis of most urgent needs - which means those determined to be more likely to drop out of school in absence of the treatment were selected to receive the cows. The data collected verified that at baseline those in the treatment had indeed acquired less education, had higher dropout ratio, were poorer, had less land, lived further away from school, and their parents had lower levels of education. All of these socio-economic indicators suggest that the selected children would have been more likely to drop out of school if the status-quo had continued. Since the selection bias (being more likely to drop out) works against the treatment effect (acquiring more education), estimates of the impact are likely to be the lower bounds of the true effect and should be valid. I find that the poor children who worked gained a significant average of 0.59 years of education over a period of 5 years compared to those who did not have any work opportunity.