How Does Child Labor Affect the Demand for Adult Labor? Evidence from Rural Mexico

Do employers substitute adults for children, or do they treat them as complements? Using data from a Mexican schooling experiment, I find that decreasing child farm work is accompanied by increasing adult labor demand. This increase was not caused by treatment money reaching farm employers: there were no significant increases in harvest prices and quantities, non-labor inputs, or non-farm labor supply. Furthermore, coordinated movements in price and quantity can distinguish this increase in demand from changes in supply induced by the treatment's income effects. Thus, declining child supply caused increasing adult demand: employers substituted adults for children. * Kirk Doran is an Assistant Professor in the Department of Economics at the University of Notre Dame. The author is grateful for helpful comments from Orley Ashenfelter, Anne Case, Marie Connolly, Angus Deaton, Susan Dynarski, Eric Edmonds, Henry Farber, Molly Fifer, Jane Fortson, Sergei Guriev, Daniel Hungerman, Radha Iyengar, Alan Krueger, Giovanni Mastrobuoni, Christina Paxson, Jesse Rothstein, Cecilia Rouse, Derek Neal, Joseph Price, Analia Schlosser, Courtney Stoddard, Elod Takats, Chris Udry, Susan Yeh, and anonymous referees. He also warmly thanks Oportunidades for their kind permission to use the PROGRESA data. The data used in this article can be obtained beginning six months after publication through three years hence from Kirk Doran, 438 Flanner Hall, Department of Economics, University of Notre Dame, [email protected].