Working Papers,
University of Aarhus, Aarhus School of Business, Department of Economics

Abstract: In an empirical microeconomic analysis that allows individual heterogeneity, we test four main

hypotheses from the recent macroeconomic literature on child labor: the substitution, subsistence,

capital market and parental education hypotheses. Using two rich Indian data sets, we find that the

reduction in child labor and/or non-school-enrollment from 1987/88 to 1993/94 is closely associated

with the increased household incomes. However, reduced capital constraints and improved literacy

rates among the parent generation also play minor roles in increasing enrollment rates. A small

counteracting effect comes from an increased need for and an increased value of substituting

children for working household heads.

Keywords: Child labor; Education; Substitution; Subsistence; Capital markets; Parental human capital; India

JEL-codes: I21; J13; O15

23 pages, January 1, 2001

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