Do Parental Entrepreneurship and Access to Microcredit Increase Child Labor? The Case of Indonesia

Misty L. Heggeness, U.S. Department of Labor (DOL)
Charita Castro, Washington University in St. Louis
Amy Ritualo, U.S. Department of Labor (DOL)

The International Labor Organization estimates that there were 215 million children 5-17 years in 2008 working below the minimum age for employment or in hazardous work. Extensive research has shown that household poverty is the most significant determinant in explaining to the supply of child labor. However, alternate studies on household land ownership and parental involvement in microfinance have documented increases in children’s work. As microfinance continues to be a predominant antidote for lifting poor households out of poverty, its application to reducing child labor may have an opposite effect. Since many children work in family businesses, the availability of credit to collateral-constrained households, while reducing household poverty, could increase children’s propensity to work. Using the longitudinal Indonesian Family Life Survey (IFLS), this paper explores to what extent type of parental work and, more specifically, parental entrepreneur opportunities and access to microcredit are associated with child labor.