Inequality and education decisions in developing countries

In this paper we analyze the effect of inequality on school enrollment, preferred tax rate and expenditure per student in developing countries; when parents can choose between child labor, public schooling or private schooling. We present a model in which parents make schooling decisions for their children, weighing the utility benefit of having a child with formal public or private education versus the forgone income from child labor or household work. Parents vote over the preferred tax rate to finance freely provided public education. The utility benefit of an educated child is proportional to expenditure per student, so that there is congestion in public school. We find that when parents can send their children to work or to private school, high inequality leads to exit from public education at both ends of the income distribution. Thus high inequality reduces the support for public education, leading to a low tax rate and expenditure per student. Exit from public education results in both high child labor and a large fraction of students attending private school. In fact there is a threshold level of inequality above which there is no longer support for public education. In addition we explore the implications for the design of foreign aid. The results suggest that foreign aid policies should focus on promoting school attendance rather than increasing school resources, as the later policy might be offset by a reduction in the recipient country’s fiscal effort, with little impact on outcomes.      

The effect of parental labor supply on child schooling: evidence from trade liberalization in India

This paper estimates the effect of changes in maternal and paternal labor supply on the schooling rates of children in India using the variation in industry-specific tariffs during a period of trade liberalization. The results show that an increase in maternal labor supplied outside of the household leads to a higher schooling probability for younger children. Specifically, a 1 day per week increase in maternal labor supply is associated with an approximately 5 % points increase in the schooling probability for children between the ages of 7 and 10. However, father’s labor supply has an insignificant effect on child schooling across all specifications. The effect for older children between the ages of 11 and 14, who face a tradeoff between schooling, market work, and domestic work, is also found to be insignificant.     

WHY DOES CHILD LABOR PERSIST WITH DECLINING POVERTY?

We develop a dynamic overlapping generations model to highlight the role of income inequality in explaining the persistence of child labor under declining poverty. Differential investment in two forms of human capital—schooling and health—in the presence of inequality gives rise to a nonconvergent income distribution in the steady state characterized by multiple steady states of relative income with varying levels of education, health, and child labor. The child labor trap thus generated is shown to preserve itself despite rising per capita income. Policy recommendations include public provision of education targeted toward reducing schooling costs for the poor or raising the efficacy of public health infrastructure. (JEL I1, J2, O1, O2)     

The schooling repayment hypothesis for private transfers: evidence from the PROGRESA/Oportunidades experiment

The schooling repayment hypothesis for private transfers predicts a positive relationship between the amount of parental investment in children’s education and the amount that adult children transfer to their parents. We provide evidence on the repayment motive using data from the Mexican conditional cash transfer program PROGRESA/Oportunidades (PO). PO pays a transfer to parents for sending their children to school. Thus, if private transfers from adult children to parents are in part repayment for parental schooling investments made in the past, then PO should decrease these transfers—parents were already exogenously compensated by the government for sending their kids to school and not to work. Exploiting the exogenous variation in the amount of cash transfers a household receives from PO for sending its children to school, we compare the private transfers received in 2007 by parental households who had children 0–16 in 1997 and started receiving the programs’ benefits in 1998 with the transfers received by similar parental households who started receiving benefits in 1999. Results suggest a repayment motive exists. That is, PO is causing adult children to transfer less resources to their parents.     

Supply of schooling and dropout rates: Evidence from the Oportunidades programme in Mexico

In this article we provide evidence that measures of school supply, such as quantity and quality at the local level, are important predictors of dropout behaviour among conditional cash transfer beneficiaries in Mexico. We use administrative records of the Oportunidades programme in both rural and urban areas to follow the schooling trajectory of a cohort of students from sixth grade to high school. Under half of rural beneficiaries attending sixth grade make it to the tenth grade. Our regression analysis indicates that the absence of a junior high school in a locality increases the probability of dropping out after sixth grade by 6.8 percentage points; the absence of a high school increases the probability of dropping out after ninth grade by 12.2 percentage points. This means that 16% of all rural sixth‐grade students would enter tenth grade if they had junior high and high schools in their localities. Attending a low‐quality junior high school increases the probability of dropping out after ninth grade by 13 percentage points in rural areas and 7.6 percentage points in urban areas.     

DOES RAISING THE SCHOOL LEAVING AGE REDUCE TEACHER EFFORT? EVIDENCE FROM A POLICY EXPERIMENT

This paper examines the effect of an increase in the compulsory school leaving age on a measure of high school teachers' effort. Differences‐in‐Differences estimates using count data methods demonstrate that the policy led to teachers increasing their hours of sickness absence by roughly 15%. This result implies that raising the compulsory school leaving age reduces teaching inputs, and hence schooling quality. A policy implication is that these laws should be coupled with measures to compensate teachers for the additional disutility. This also suggests that instrumental variable estimates of returns to education that utilize these changes for identification may be downwardly biased. (JEL J22, J38)     

CHILD LABOR AND SCHOOLING RESPONSES TO ACCESS TO MICROCREDIT IN RURAL BANGLADESH

Microcredit has been shown to be effective in reducing poverty in many developing countries. However, less is known about its effect on human capital formation. In this article, we examine the impact of access to microcredit on children's education and child labor using a new and large data set from rural Bangladesh. The results show that household participation in a microcredit program may increase child labor and reduce school enrollment. The adverse effects are more pronounced for girls than boys. Younger children are more adversely affected than their older siblings and the children of poorer and less educated households are affected most adversely. Our findings remain robust to different specifications and methods, and when corrected for various sources of selection bias. (JEL H43, I21, J13, J24, L30, O12)     

The Impact of Temporary Labor Migration on Mexican Children's Educational Aspirations and Performance1

This article examines how temporary U.S. labor migration by family members and by students affects the educational aspirations and performance of those same students growing up in Mexican migrant communities. Labor migration affects these children in two ways. First it brings remitted U.S. earnings into the household which allows parents to provide more education for their children and reduce the need for children's labor. Higher incomes are also associated with numerous factors that improve the general well‐being of children, as reflected in various indicators including higher school grades. Labor migration also has negative impacts on children. In addition to family stress and behavioral problems with adolescents due to parental and sibling absence, migration provides an example of an alternative route to economic mobility. Children growing up in migrant households have access to information and social networks that reduce their likelihood of migration failure should they choose this alternative to the Mexican labor market. We analyze a unique data set from a stratified random sample of 7600 grammar, junior high, and high school‐level students in a state capital, a large town, and 25 rural communities in a Mexican migrant‐sending state. We find that high levels of U.S. migration are associated with lower aspirations to attend a university at all academic levels. We find, however, a positive relationship between U.S. migration and grades. We conclude that while U.S. migration provides financial benefits that allow children to continue schooling and perform well, it may also reduce the motivation to attain above‐average years of schooling.     

Home and school influences on the behavioral and academic outcomes of low-income children of color

Framed within contextual systems model, this study examines how home and school operate together to shape behavioral and academic outcomes for 544 low-income African American (56%) and Latino/a (44%) elementary school-aged children (mean age?=?7.88 years, SD?=?1.46, 50% male). Using data from Welfare, Children, & Families Study: A Three City Study and multiple group path analysis, we found that for children in kindergarten through third grade, the adequacy of the home resources was positively related to applied problem scores (e.g. math literacy) and negatively associated with externalizing behavior. For fourth- to sixth-graders, the adequacy of classroom resources was negatively associated with applied problem scores. For both age groups positive teacher–child relational quality was also a positive predictor of externalizing behavior. Results revealed that barriers to parental involvement in school were a negative predictor of applied problem scores for low-income children in early and later elementary school. Implications for policy and practice aimed at strengthening opportunities for children and families from marginalized communities are discussed.     

Children’s Time Use: Labor Divisions and Schooling in Indonesia

Data from the Worker and Iron Status Evaluation are used to examine gendered patterns in children’s time in market and nonmarket work, schooling, and leisure in Indonesia (N= 2,929). Boys spend more time in market work; girls spend more time in nonmarket work. Work responsibilities increase with age as well as gender differentials in children’s time use. By age 18, girls spend nearly 1 more hour per day working and enjoy significantly less leisure time, but the gender gap in schooling is not significant, suggesting that parents and children are committed to both work and schooling. Additionally, Tobit regression results suggest that parents’ education, household income, and rural residency are important predictors of children’s labor and schooling time.     

Tax incentives and family labor supply in Austria

The family policy reform 2009 introduced tax deductibles for children and child care expenditures in Austria. In this paper we evaluate this reform based on a structural labor supply model with unitary households which has been estimated on the European Statistics on Income and Living Conditions cross-sections 2004–2008. We find that the reform had only small employment effects, most of them being generated through the introduction of a child care deductible. However, to illustrate the employment potential of a shift from universal child transfers to tax deductibles we propose additional simulations showing that such a policy shift would yield an increase in full time equivalents of approximately .70 % of overall employment, with married females increasing their labor supply by up to 1.5 %. While the proposed policy shifts have regressive effects in terms of their distributional impact, we show that phasing-out the tax deductible at higher income allows for the compensation of lower-income households without jeopardizing positive employment effects.     

WHAT DETERMINES FAMILY STRUCTURE?

We use data from the 1979 cohort of the National Longitudinal Survey of Youth to estimate the effects of policy and labor market variables on the demographic behaviors that determine children's family structure experiences: union formation and dissolution, and fertility. Male and female wages have substantial effects on family structure for children of black and Hispanic mothers. The tax treatment of children also affects family structure. Welfare reform, welfare benefits, and unilateral divorce had much smaller effects on family structure for the children of this cohort of women. Trends in wages and tax rates explain only a small share of the observed changes in family structure in recent decades. (JEL J12)     

Elusive public support for us child care policy

Most U.S. parents are in the paid labor force (US Department of Labor Statistics. (2014). Women in the labor force: A databook. Retrieved from http://www.bls.gov/opub/reports/cps/women-in-the-labor-force-a-databook-2014.pdf). Using a purposive non-probability sample (N?=?415) of primarily upper-middle class, married White Democratic women, this study explores support for government regulation, funding, and provision of child care and the factors and context that may shape their beliefs. Although some respondents held reservations about government involvement, over 80% indicated that government should play a role in regulating care for children in all age categories (0–3, 4–5, and 6–12). Eighty-nine percent supported some form of government financial support for child care, and 58% and 61% saw a role for provision of child care for children age 0–5 and 6–12, respectively. Both regression analyses and qualitative responses indicated that support for a government role in child care was influenced by parents’ own difficulties finding affordable and sufficiently comprehensive care, and the number of children they had. We provide recommendations for how best to target these groups of parents to support child care advocacy campaigns, tapping into their own struggles as a source of empathy for others as well as an impetus to shift toward a more universal notion of government support for child care.     

Do Children's Behavior Problems Limit Poor Women's Labor Market Success?

Economically disadvantaged mothers face numerous barriers to stable, quality employment opportunities. One barrier that has received limited attention in previous research is having a child with significant psychological or behavioral problems. Using a representative sample of low‐income mothers and early adolescent children from the Three‐City Study (N = 717), we assessed whether adolescents' behavior problems prospectively predicted mothers' employment status, consistency, and quality. Lagged random‐effects regression models suggested that adolescents' psychological distress and delinquency inhibited the labor market success of disadvantaged mothers, although school problems were related to greater work effort among mothers. Links between labor market success and both psychological distress and delinquency differed across mothers with male and female adolescents.     

Does work during childhood affect the health of Guatemalan adults?

The diversity of potential relationships between child labor and health makes the empirical disentanglement of the causal relationship a difficult exercise. This paper examines the long run impact of child labour on health by controlling for unobserved household specific characteristics. In order to control for the unobserved households specific effect, we estimate a conditional fixed effect model using data on siblings constructed from the Guatemalan National Survey of Living Condition. The estimation results reinforce the conventional wisdom that child labor is harmful for health in the long run. The results can be interpreted as a lower bound of the true impact since healthier children are most likely to offer themselves for employment and to be appointed. The views expressed in this paper are those of the authors and do not necessarily represent those of IMF and IMF policy.     

Child Care Choices in Spain

In this paper we examined the determinants of child care choices among families with young children in Spain, by means of a conceptual framework that encompassed need, costs, and availability. Based on data from the Spanish Time Use Survey and Household Budget Survey, our study indicated that, regardless of model specification, the age of the child, the mother’s labor force decisions, and the prices of child care services available were the most important factors that mothers considered when they chose a type of child care. Day care center services substituted for babysitters when the price of babysitters rose; and relative and parent care substituted for day care centers when these services became more expensive. We found no different sensitivity to price changes for working and non-working mothers. From a public policy perspective, child care price subsidies were found to have much stronger effects on child care decisions than child allowances or public provision of school slots.     

Head Start Impact on Fathers’ Involvement and Black Children’s Development

ABSTRACT

This study examined Head Start’s impact on fathers’ school-based involvement and associations with Black children's cognitive, behavioral, and social-emotional skills. With a sample of 1,354 Black children, fathers’ involvement was measured as attendance at school meetings, teacher conferences, school events, and/or volunteering at school events. Children’s cognitive skills were literacy, language, and mathematics scores. Parents reported on the parent–child relationship, children’s social skills, and behavioral concerns. Non-resident fathers in Head Start were more involved in Black children’s schooling than not enrolled in Head Start. Unexpectedly, fathers’ school-based involvement and Head Start enrollment were not related to children’s developmental outcomes at kindergarten age. Head Start serving impoverished Black families should consider implementing targeted school-based father involvement initiatives that directly influence children.     

WELFARE IMPACT OF A BAN ON CHILD LABOR

This article presents a new rationale for imposing restrictions on child labor. In a standard overlapping generation model where parental altruism results in transfers that children allocate to consumption and education, the Nash‐Cournot equilibrium results in suboptimal levels of parental transfers and does not maximize the average level of utility of currently living agents. A ban on child labor decreases children's income and generates an increase in parental transfers bringing their levels closer to the optimum, raising children's welfare as well as average welfare in the short run and in the long run. Moreover, the inability to work allows children to allocate more time to education, and it leads to an increase in human capital. Besides, to increase transfers, parents decrease savings and hence physical capital accumulation. When prices are flexible, these effects diminish the positive welfare impact of the ban on child labor. (JEL D91, E21)     

The Effects of Children’s Health on Mothers’ Employment

When children have health problems, mothers face a tradeoff between the decision to work to satisfy increased expenses and the decision to stay home to fulfill enlarged caregiving needs, especially for children with chronic conditions. This research used an instrumental variables approach to investigate the labor market consequences of mothers due to burden to care children with health problems. We found mothers’ employment probability increased by 0.9% for every $100 of increased out-of-pocket medical spending, while employment probability fell by 1.0% for every half day of school/day care a sick child missed. By correcting for endogeneity we addressed a potential empirical bias. Analyses by subgroups showed that Hispanic mothers were less likely to work in the labor market with high caregiving burden. We also found that the effects of time burden on labor market outcomes were magnified for black mothers.     

WOMEN PREFER LARGER GOVERNMENTS: GROWTH,STRUCTURAL TRANSFORMATION,AND GOVERNMENT SIZE

The increase in income per capita is accompanied, in virtually all countries, by two changes in economic structure: the increase in the share of government spending in gross domestic product (GDP), and the increase in female labor force participation. We argue that these two changes are causally related. We develop a growth model based on Galor and Weil (1996) where female participation in market activities, fertility, and government size, in addition to consumption and saving, is endogenously determined. Rising incomes lead to a rise in female labor force participation as the opportunity cost of staying at home and caring for the children increases. In our model, higher government spending decreases the cost of performing household chores, including, but not limited to, child rearing and child care, as in Rosen (1996) . We also use a wide cross‐section of data for developed and developing countries and show that higher market participation by women is positively and robustly associated with government size. We then investigate the causal link between participation and government size using a novel unique data set that allows the use of the relative price of productive home appliances as an instrumental variable. We find strong evidence of a causal link between female market participation and government size. This effect is robust to the country sample, time period, and a set of controls in the spirit of Rodrik (1998) . (JEL O4, E62, H11)