Cash Transfers and Child Labor

Abstract

Cash transfer programs are widely used in settings where child labor is prevalent. Although many of these programs are explicitly implemented to improve children’s welfare, in theory their impact on child labor is undetermined. This paper systematically reviews the empirical evidence on the impact of cash transfers, conditional and unconditional, on child labor. The authors find no evidence that cash transfer interventions increase child labor in practice. On the contrary, there is broad evidence that conditional and unconditional cash transfers lower both children’s participation in child labor and their hours worked and that these transfers cushion the effect of economic shocks that may lead households to use child labor as a coping strategy. Boys experience particularly strong decreases in economic activities, whereas girls experience such decreases in household chores. The authors findings underline the usefulness of cash transfers as a relatively safe policy instrument to improve child welfare but also point to knowledge gaps, for instance regarding the interplay between cash transfers and other interventions, that should be addressed in future evaluations to provide detailed policy advice. The remainder of this review is organized as follows. Section 1 provides the necessary background. It heuristically describes why the effects of cash transfers on child labor are theoretically undetermined, and it introduces the procedure that we used to identify the relevant studies for this review. Section 2 discusses the impact of two subsets of unconditional cash transfers: programs designed to support poor households’ investments in children’s human capital and old age pension schemes. Section 3 discusses the average impact of conditional cash transfer schemes on the intensive and extensive margin of child labor, the impact of conditional cash transfers on child labor compared to their impact on school participation, heterogeneity by poverty, age, and gender, spillover effects, long-run effects, determinants of program effects, protection from shocks, and variations on the basic conditional cash transfer scheme. Section 4 discusses and concludes.