The effects of economic opportunities on child labor and schooling

Economists and policy makers in developing countries are concerned with the effect that child employment may have on the accumulation---and quality---of human capital. If it is the poor who send their children to work out of economic necessity, and if this precludes schooling, then the most vulnerable populations may get stuck in an inter-generational poverty trap.; Recent empirical research identifies the effect of exogenous variations in household wealth and/or income on children's schooling and employment with time variation and quasi-experiments. I test whether---and how---economic opportunities affect child outcomes. Are children who live in households with self-employment opportunities more likely to work and less likely to attend school? In Nicaragua in 1998, home employment in commerce and agriculture was associated with higher probabilities of child work, and in some cases, higher probability of school enrollment.; I also test whether temporary changes in local economic conditions arising from exogenous variation in coffee prices or production lead to higher or lower child labor and schooling in rural regions of Nicaragua and Brazil. I find that a coffee production boom in Nicaragua between 1993--1998 led to a greater probability of child labor in coffee regions relative to non-coffee regions, but left schooling unaffected. In Nicaragua's coffee regions, children of low-education households were less likely to be exclusively in school and more likely to be exclusively working as a result of the coffee boom, while high-income children remained in school and combined it with work. In Brazil during the 1990s, when the county-level value of coffee production increased rural children were more likely to work and less likely to be in school. Among low-income children the probabilities of schooling---both while working or exclusively---were reduced, and while the probability of exclusive schooling fell among high-income children, they managed to work and go to school. These findings suggest that parents' time allocation decisions of their children reflect the temporary nature of changes in local economic conditions---either as a result of an international price shock, or as a result of climatic events, and that these vary by their education level.