Risk and Schooling Decisions in Rural Madagascar: A Panel Data-Analysis

Abstract

Most households in rural Madagascar are engaged in agriculture and derive a large share of their income from the production of food or cash crops and from animal husbandry. However, agricultural yields can be extremely volatile due to weather conditions, pests, insects, rodents and other calamities. As a result, households record large fluctuations in their incomes that must be dealt with. Since the usual consumption-smoothing market mechanisms are quite limited in the Malagasy context, households need to rely on nonmarket mechanisms or to adopt multi-faceted strategies to cope with risk. In this paper, we examine the possibility that parents obtain informal income insurance by letting their children work. We test this hypothesis by examining the relationship between household income shocks and human capital investment in children. In particular, we investigate whether children's propensity to join school and to drop out of school responds to transient shocks. We also investigate issues such as gender and intrahousehold resource allocation.

Is informal risk-sharing less effective for the poor? Risk externalities and moral hazard in mutual insurance

“…Second, adjustments in terms of household composition and activities can be made, such as the use of child fostering (Akresh (2009)) and child labor (Jacoby and Skoufias (1997), Beegle et al (2006), Gubert and Robilliard (2008), Bjrkman-Nyqvist (2013)). …”

Child Labor and Rainfall Deviation: Panel Data Evidence from Rural Vietnam

“…First, we exploit the availability of panel data more comprehensively than previous studies by using a child‐level fixed‐effects strategy that allows us to control for unobserved time‐invariant child characteristics that can potentially influence the household's child labor decision. This departs from the existing literature which mostly includes household (Beegle, Dehejia, and Gatti ; Gubert and Robilliard ) or village (Colmer ) fixed effects. This means that results of changes in coefficients are interpreted as being associated with within child changes.…”

“…She notes that the subsequent fall in household income of coca growers resulted in increases in the work hours of children living in coca‐growing states. Beegle, Dehejia, and Gatti () and Gubert and Robilliard () test the relationship between child labor and the value of crop loss due to insects, rodents, and other calamities. They find that child labor increases when there is an unexpectedly poor harvest, and that child labor declines as the household recovers from this negative shock.…”

Schooling Decisions in Indonesia: a Lesson From Indonesian Crisis

“…Several studies on the effect of adverse shocks to investment in human capital, especially in the field of education, involve a variety of different empirical results. The transitory income gives more effect on dropout rates than going to school (Gubert & Robilliard, 2008). Chevalier et al (2013) showed that permanent income had a significant effect on children's schooling in the UK, notably stronger effects on sons than daughters.…”