Child Labour Effects of Credit Rationing and Uninsured Shocks

This book chapter reviews evidence on how missing or incomplete credit and insurance markets affect whether children work. It reports that when a household suffers a negative shock, a child is more likely to work. It notes that child labour can persist over time, citing the Rwanda genocide as an example. It also reports that schemes that reduce risk, such as health insurance, lower child work. It warns that a positive shock can sometimes raise child labour if it increases the returns to children's work.

Key points

• A negative shock increases the probability that a child will work.
• Child labour shows a high degree of persistence, as in the case of the Rwanda genocide.
• Risk-reduction schemes have a beneficial and substantial effect on child work, confirmed by experimental evidence on increased access to health insurance.
• A positive shock can also raise child labour if it increases the returns to child labour.
• Policy design must take account of these changes in household incentives.

Limitations

Only the abstract is available. It gives no numbers, sample details or study methods, and it does not say which countries the evidence comes from beyond the Rwanda example. It is a review of other research, not a single evaluation of an intervention, so no evidence record is given.