Child labor and schooling responses to anticipated income in South Africa

Abstract

Forward looking, unconstrained households make child labor and schooling decisions considering their permanent income and weighing the relative returns to child time in various potential activities. The timing of anticipated changes in income should have no effect on child labor and schooling in a setting where households can borrow against permanent income. However, this study documents large increases in schooling attendance and declines in total hours worked when black South African families become eligible for fully anticipatable social pension income. As an explanation, the data are most consistent with liquidity constraints for black elder males forcing rural families into less schooling for boys than they would choose absent the constraint, perhaps because of schooling costs.