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Abstract:
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This study contributes to the understanding of the impacts of household borrowing and household income-generating activities on child labor in Peru. Peru lends itself as an interesting case to study given the rise of self-employment, the rapid growth of microfinance and the increase of child labor over the last decade. Using a probit and a tobit model, this study shows that the relationship between borrowing and child labor is not unequivocally negative. Across models and samples, the results suggest that children in households that borrowed for the household enterprise were more likely to work than children in households that did not borrow. The study found the opposite effect for borrowing for the farm. The effects of borrowing for consumption on child labor were mixed across models and samples. This study also found a robust positive relationship between ownership of agricultural and non agricultural enterprise and child labor. Income-generating activities found to increase child labor were agriculture, hotels and restaurants, retail, manufacturing, and domestic work. Although issues of endogeneity of borrowing and child labor limit the internal validity of these estimates, mixed results from the regression analysis should encourage future research. One policy implication gleaned from the study is that expanding access to credit to the poor in order to encourage micro-enterprise activity may potentially increase child labor. This implies the need to think more carefully about the design of micro-credit programs, which could incorporate built-in conditionalities to make access to micro-credit conditional on child school attendance. |