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Economics for the Vulnerable

Paper Session

Saturday, Jan. 6, 2024 8:00 AM - 10:00 AM (CST)

Convention Center, 222
Hosted By: Catholic Research Economists Discussion Organization
  • Chair: Jeanne Lafortune, Pontifical Catholic University of Chile

Child Labor, Rainfall Shocks, and Financial Inclusion: Evidence from Rural Households

Razvan Vlaicu
,
Inter-American Development Bank
Carolina Bernal
,
Del Rosario University

Abstract

This paper examines the effect of rainfall shocks on rural households’ allocation of children’s time between domestic activities and school attendance by changing the intertemporal trade-off between current household income and future potential earnings, and whether household financial inclusion mitigates or exacerbates the impacts of these shocks. The data come from a three-round panel household survey in rural Colombia collected between 2010-2016. The main findings are that rainfall shocks induce households to choose immediate benefits over long-run investments in education by increasing the incidence of child labor and household chores at the expense of school attendance. Indebtedness through pre-existing formal loans reinforces the likelihood that a child works due to rainfall shocks, whereas asset insurance, foreign remittances, and natural disaster aid mitigate or eliminate the shock-induced shift toward domestic activities and away from schooling.

Extortion Impacts on Micro-Entrepreneurial Behavior in the Northern Triangle: Evidence from Guatemala

Alejandro Estefan
,
Notre Dame University
Tatiana Flores
,
World Bank
Uriel Galace
,
Duke University
Martina Improta
,
University of Genoa
Romina Ordoñez
,
Inter-American Development Bank

Abstract

This paper studies the impact of extortion on the business outcomes and behavior of low-income micro-entrepreneurs in the Northern Triangle. We use official crime microdata and administrative records from the franchise stores of a multinational company operating in the food retail sector of Guatemala to show that extortion raises security costs, limits store entry, and increases the likelihood of market exit. Furthermore, we show that extortion victimization varies positively with store sales, implying that extortionists can figure out business profitability. Informed by these stylized empirical facts, we model the theoretical effects of extortion under a span-of-control framework and show that extortion acts as a sales tax and that security measures act as a fixed cost, both of which dampen the incentives for entrepreneurial undertakings, thereby creating a poverty trap. We conclude by providing causal evidence that toughening local legislation increases extortion reporting, suggesting that improvements to state
capacity can help ameliorate extortion’s effects on micro-entrepreneurs.

Improving Worker’s Safety in Brazil

Jeanne Lafortune
,
Pontifical Catholic University of Chile
Jose Tessada
,
Pontifical Catholic University of Chile
Cecilia Machado
,
Getulio Vargas Foundation
Rogerio Santarrosa
,
Insper

Abstract

We conducted a large RCT to evaluate the optimal policy for occupational safety in a developing country. Collaborating with the ministry of labor, we compare a control group of firms where no interventions are realized to one group that receives the standard labor safety inspection and one where the firm is first trained through an online class and then, six month later, receives an inspection. We find that the inspections reduce substantially accidents, particularly those that are less severe. The decrease is significantly larger for firms that receive both the training and the inspection visit. Furthermore, the accident decrease in that case is more focused on the type of accidents that the inspection wished to decrease. We then study the impact of the intervention on wages and on perception of safety through a survey conducted to workers and managers of the firms in the sample.

Discussant(s)
Jose Tessada
,
Pontifical Catholic University of Chile
Daniel Prudencio
,
Monterrey Institute of Technology
Kira Villa
,
University of New Mexico
JEL Classifications
  • O1 - Economic Development