School attendance, child labor and local labor market fluctuations in Urban Brazil

While the income (poverty) effect on child labor is long established as a main determinant of child labor, there is a growing body of literature considering the pull of the labor market. This paper demonstrates that after controlling for household characteristics, employment rates for 14-16 year old boys and girls in urban Brazil increase as local labor market opportunities improve. Children are also more likely to leave school as local labor market conditions become more favorable. The relationship between children's schooling and work and local labor market conditions changes in years of crisis compared to other years. The effects of macroeconomic fluctuations on children's school and work behavior are examined with particular focus on whether the income effect or substitution effect dominates as macroeconomic conditions change over time. The study uses data from the Pesquisa Nacional Amostra de Domicilios, a large household survey that is conducted almost annually by the IBGE. We use variation in the urban areas of 25 states over 12 years to identify the aggregate effects.