Poor women with children in Ecuador were selected at random for a cash transfer equivalent to 7 percent of monthly expenditures. The transfer is greater than the increase in schooling costs at the end of primary school, but it is less than 20 percent of median child labor earnings in the labor market. Poor families with children in school at the time of the award use the extra income to postpone the child's entry into the labor force. Students in families induced to take-up the cash transfer by the experiment reduce their involvement in paid employment by 78 percent and unpaid economic activity inside their home by 32 percent.
Understanding economic influences on child time allocation is important for the political economy of child labor regulation and the design of child labor policy. The time allocation of children and household incomes are joint outcomes of a single decision-making process, so establishing a causal relationship is difficult. Many correlates of family income influence the economic structure of the household, raising omitted variables concerns.