The Education, Labor Market, and Health Consequences of Child Labor

Although there is an extensive literature on the determinants of child labor and many initiatives aimed at combating it, there is limited evidence of the consequences of child labor on socio-economic outcomes such as education, wages, and health. We evaluate the causal effect of child labor participation on these outcomes using panel data from Vietnam and an instrumental variables strategy. Five years subsequent to child labor, we find significant negative impacts on school participation and educational attainment, but also find that those who worked as children have substantially higher earnings as (young) adults. We find no significant effects on health. Over a longer horizon, we estimate that from age 27 onward the forgone earnings attributable to lost schooling exceed any earnings gain; the net present discounted value of an incremental increase in child labor is positive for discount rates of 12 percent or higher. We provide evidence that child labor is prevalent among households that are likely to have higher borrowing costs, that are farther from schools, and whose adults experienced negative returns to their own education. This evidence suggests that reducing child labor will require both facilitating access to credit and convincing parents that their children will experience positive returns to education.