# **INTRODUCTION**

Literature on child labor has grown considerably over the last 15 years, and this is not just because of increasing data availability. Child labor has fallen over the years, but the worldwide figures are still alarming. According to the International Labour Organization (ILO), 264 million children aged 5 to 17 participated in the labor market in 2012. Of this, 168 million were child labor, that is, under the minimum legal age and/or working in hazardous activities.

Due to the negative externalities associated with children’s participation in the labor force, it is argued that the public sector could intervene by changing the circumstances that cause parents to send their children to work (see Basu and Van, 1998). In fact, many countries have adopted bans or other mechanisms to break down the ‘intergenerational child labor trap’ (see Emerson and Souza 2003 and Edmonds 2008 for a survey).

Basu and Van (1998), for instance, argue that a parent’s decision to send a child into the labor force might be seen as a rational choice in a poor household facing many constraints. Given a few assumptions, the labor market may have multiple stable equilibria, one characterized by children participating in the labor force and depressed adult wages, and another in which children do not participate in the labor force and adult wages are higher. Because these two equilibria are stable, the authors argue that if children participate in the labor force, a ban could be put in place by the government to shift the economy from this equilibrium to one without child labor.<sup>1</sup> Although many policies have been put in place to fight child labor, too little is known about the causal impact of such interventions, particularly in developing countries where empirical evidence is almost nonexistent.<sup>2</sup> This paper helps fill this gap by delving into the consequences of two recent federal legislations in Brazil aimed at children of a certain age range.<sup>3</sup> In December 1998, Brazil increased the minimum employment age from 14 to 16. This policy change gave rise to a natural experiment that we will investigate in this paper.<sup>4</sup> We used a difference-in-differences (DD) approach to estimate the impact of the law passed in December 1998. The results suggest that the change in law reduced labor force participation rates of 14-year-old boys as a whole, but not of girls, who seem to have shifted to the informal sector. The results for boys are interesting as they indicate

> 1 The two main assumptions stemming from this result are that the rise in adult wages that results from a ban has to be high enough to compensate for the children’s ‘forgone’ income; and that it allows parents to consume children’s leisure. That means: (i) that child and adult labour inputs are perfect substitutes, and (ii) that children’s leisure is a normal good for the parents. This theoretical framework therefore suggests that net benefit for households from a child labour ban is ultimately an empirical question.

> 2 The only study we are aware of for a developing country is Bharadwaj et al. (2013) for India.

> 3 The available evidence for such policies comes almost exclusively from the U.S., mainly the impact of minimum legal age legislations at the beginning of the last century. See, for instance, Moehling (1999), Margo and Finegan (1996), Lleras-Muney (2002), Tyler (2003), and Manacorda (2006).

> 4 Ferro and Kassouf (2005) studied the impact of the law by looking at cohorts of 14 and 15 year-old children between 1995 and 2003. Their analysis is akin to a before-and-after analysis without a comparison group.

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