Effects of the Global Financial Crisis on Children’s Outcomes in El Salvador

Suzanne Duryea, Inter-American Development Bank
Melisa Morales, Inter-American Development Bank

Central America has been one of the world regions hardest hit by the global financial crisis. This paper analyzes the short-run effects of the economic crisis on children’s schooling and employment outcomes in El Salvador, exploiting repeated cross sections of the annual household survey for the period 2000-2008. Although previous studies have found scant evidence that aggregate shocks in Latin America increased child labor or school drop-out rates, we find that this early phase of the financial crisis decreased school attendance for girls and boys ages 10-16 and increased child employment for boys of the same age range. Additionally the shock is found to shift attendance toward public schools. A falsification test demonstrates that a placebo, or “false crisis” defined as second semester 2007, does not have similar adverse impacts on children’s outcomes as the manifested crisis.