Abstract
This paper analyses child labour participation and its key determinants using data sets from Peru and Pakistan. The results include tests of the ‘Luxury’ and ‘Substitution’ hypotheses that play key roles in recent studies on child labour and child schooling. The results reject both hypotheses in the context of child labour in Pakistan and suggest that income and related variables do not have the expected negative effect on children's work input. Rising wages of adult female labour in Pakistan, and falling adult male wage in Peru lead to increased participation of children in the labour market. The results on the combined country data formally establish the presence of strong individual country effects in the estimated regressions. For example, ceteris paribus, a Peruvian child is more likely to experience schooling than a Pakistani child. However, both countries agree on the positive role that adult female education and infrastructure investment in basic amenities can play in discouraging child labour and encouraging child schooling.
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