Labor and Social Protection
This is the second in the series of papers from graduates on the job market this year.
The previous post in this blog discussed the positive dynamic effects of conditional cash transfer (CCT) programs in Mexico and Nicaragua – in particular on asset accumulation and the incidence of entrepreneurship by the rural poor.
No one said it’s easy to run a randomized experiment!
In the early 20th century Helen Todd, a factory inspector in Chicago, interviewed 500 children working in factories, often in dangerous and unpleasant conditions. She asked children the question: “If your father had a good job and you didn’t have to work, which would you rather do—go to school or work in a factory?” 412 said they would choose factory work. One fourteen year old girl, who was interviewed lacquering canes in an attic working with both intense heat and the constant smell of turpentine, said “School is the fiercest thing you can come up against. F
Across developing countries, there is considerable under-investment in children's human capital; it is reflected in low immunization rates, child malnutrition, high drop-out rates, etc. Because of the (both individual and aggregate) long-term effects of human capital investment during childhood, governments across the globe have designed and implemented policies to encourage parents to invest more in the health and education of their children (numerous conditional cash transfer programs across countries are some examples).
In the 1960s, black and white individuals in the United States had radically different labor market outcomes. In 1962, the unemployment rate for African-Americans was 13 percent while it was only 6 percent for whites. Fifty years have passed, enough time for Martin Luther King to go from movement leader to monument, but as of 2010, the unemployment rate in the U.S.
Yesterday, in Part I of this post, we argued the extant empirical evidence suggests that the conditions cause a substantial amount of the desired behavior change intended by CCT programs. In other words: the “substitution effect” due to the condition may well be larger than the “income effect” of the transfers. For example, in the case of the Malawi experiment, the income effect was responsible for less than half of the total impact on school enrollment.