Where child labor supply finds its demand

Abstract

We analyze child labor incidence in small industries in Indonesia at the village level. Using a data set of all Indonesian villages and urban neighborhoods we find that child labor is significantly associated with poverty, natural and epidemic disasters, and with unemployment. It is negatively associated with credit and school availability, only if we correct for the existence of small industries in that village. Our results thus confirm the importance of school availability and credit provision as policy instruments to reduce child labor. They also show that it is imperative to look at the interplay of demand and supply determinants of child labor to arrive at unbiased results and correct policy conclusions. Contact: krisztina.kis-katos@vwl.uni-freiburg.de. We are grateful to the Volkswagen Foundation for financial support and Fitria Fitrani for excellent research assistance. All remaining errors are ours.