Can Capital Investment Relieve Children from Labor?: Consequences of Poverty Alleviation Program in Indonesia

Chikako Yamauchi, Australian National University

With 211 million children working worldwide, child labor is recognized as a serious global problem. In order to alleviate poor households’ reliance on child labor, governments often encourage such households to invest in family enterprise and enhance adults' income-generating capacity. This paper examines how publicly injected funds for such investments affect the allocation of children’s time between work and schooling using Indonesia's anti-poverty program, which provides poor villages with a fund for business loans. Results indicate that the program increases labor supplied by adults in households with relatively educated heads. However, these households leave the share of children at school or at work unchanged, suggesting that improving adults’ employment status is not a guaranteed remedy to advance children’s education. Meanwhile, households with less-educated heads significantly increase the share of girls attending school without showing evidence for productive investment, which implies the need for educational loans/grants for these least privileged households.