Weathering the Storms: Credit Receipt and Child Labor in the Aftermath of the Great Floods (1998) in Bangladesh

Summary In this paper we use data from a unique survey conducted in the aftermath of the 1998 floods in Bangladesh to examine how the household shock-child labor relationship is affected by credit receipts of households. Adopting the ratio of assets lost due to the floods as a likely exogenous shock proxy, we find that child labor increases with the magnitude of the shock but only if households do not receive credit. This suggests that following shocks child labor may be a response to non-availability of credit. The policy implication suggests a distinct and alternative channel in combating the economic incentives behind child labor--access to credit diminishes the immediate financial burden on constrained households, reducing their need for child labor.