Household choices of child labor and schooling: a simple model with application to Brazil

This paper argues that conflicting results from previous literature—related

to the effect of economic conditions on child labor—derive from different

income and substitution effects implicit in different types of income variation.

We use agricultural shocks to local economic activity in Brazil (coffee

production) to distinguish between increases in household income and increases

in the opportunity cost of time. Results show that higher household

wealth is associated with lower child labor and higher schooling. Nevertheless,

temporary increases in local economic activity are associated with

higher child labor and lower schooling, particularly for children with poor

economic backgrounds.