1 Are Adults in Demand When Children Leave the Land ?

Do employers substitute adults for children, or do they treat adults as complements to children? Any policy to reduce child labor depends on the answer to this question, but any empirical strategy to answer it must overcome two obstacles: (1) whatever program reduces child labor supply must have no direct impact on adult labor demand. (2) Any program that changes child labor supply will almost certainly affect adult labor supply; therefore, changes in adult labor demand must be identified without assuming constant adult labor supply. I hypothesize and establish that schooling experiments can reduce child labor supply without directly affecting adult labor demand. Furthermore, my strategy can identify changes in adult demand without assuming constant adult supply, by analyzing coordinated movements in price and quantity. Applying this strategy to a Mexican schooling experiment, I find that a decrease in the supply of child farm labor is accompanied by an increase in the demand for adult farm labor. This increase was not directly caused by treatment money reaching employers: there were no significant effects on expenditures on non-labor inputs, on hectares of land used, on output prices or on harvest size. Furthermore, the wages of healthy non-treated adults living around children who stopped working also increased, suggesting that treatment-related health increases were not responsible for the wage change. Thus, the fall in child labor supply caused the increase in adult labor demand: in other words, employers substituted adults for children. * University of Notre Dame, Department of Economics and Econometrics, [email protected]