Does Child Labour Displace Schooling? Evidence on Behavioural Responses to an Enrollment Subsidy

TLDR

Child labour is argued to reduce schooling and perpetuate poverty among poor families, yet a theoretical model predicts that a subsidy may increase schooling while its effect on child labour remains ambiguous. The study tests whether a targeted enrollment subsidy reduces child labour by examining its impact on children's labour participation and school enrollment. The authors analyze the pure school‑price change induced by the subsidy in rural Bangladesh to assess its effects on child labour and schooling. The subsidy increased schooling far more than it reduced child labour, and substitution effects helped protect current incomes from the higher school attendance.

Abstract

It is often argued that child labour comes at the expense of schooling and so perpetuates poverty for children from poor families. To test this claim we study the effects on children's labour force participation and school enrollments of the pure school‐price change induced by a targeted enrollment subsidy in rural Bangladesh. Our theoretical model predicts that the subsidy increases schooling, but its effect on child labour is ambiguous. Our empirical model indicates that the subsidy increased schooling by far more than it reduced child labour. Substitution effects helped protect current incomes from the higher school attendance induced by the subsidy.