Conditional cash transfers tools to combat child labor: Evidence from a randomized controlled trial in Costa Rica

• Published date: 01 February 2023
• Author: Jaime A. Meza‐Cordero
• Date: 01 February 2023
• DOI: http://doi.org/10.1111/rode.12949

REGULAR ARTICLE

Conditional cash transfers tools to combat child

labor: Evidence from a randomized controlled

trial in Costa Rica

Jaime A. Meza-Cordero

Department of Economics, University of

Southern California, Los Angeles,

California, USA

Correspondence

Department of Economics, University of

Southern California. 3620 South Vermont

Ave, Kaprieliean Hall 300, Los Angeles,

CA 90089, USA.

Email: jaime.meza@usc.edu

Abstract

The Government of Costa Rica collaborated with a research

team to conduct a randomized controlled trial of their

Working Children and Adolescents program. The program

provided working youth with a monthly cash transfer with

the conditions that they attend school regularly and com-

plete their grade. This study examines the effect of the cash

transfer on (1) child labor and hazardous child labor partici-

pation as well as hours worked; (2) school enrollment,

attendance, and completion; and (3) self-reported health.

The main findings provide evidence of a statistically signifi-

cant reduction of more than 4 hours worked per week by

children. The findings also suggest null effects on labor par-

ticipation and school outcomes. Cost-effectiveness analysis

shows that the program demonstrates a transfer effective-

ness and cost-effectiveness comparable to similar interven-

tions in Latin American countries. The subsidy alone does

not seem enough to improve schooling outcomes, justifying

the necessity of additional education policies to comple-

ment the cash transfer program.

KEYWORDS

child labor, conditional cash transfers, Costa Rica, RCT

JEL CLASSIFICATION

J08, H24, I24, I25, I38

Received: 24 May 2022 Revised: 13 September 2022 Accepted: 16 September 2022

DOI: 10.1111/rode.12949

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distrib ution and

reproduction in any medium, provided the original work is properly cited.

© 2022 The Author. Review of Development Economics published by John Wiley & Sons Ltd.

220 Rev Dev Econ. 2023;27:220–246.

wileyonlinelibrary.com/journal/rode

1|INTRODUCTION

Child labor seriously threatens well-being, human development, productivity, and equality. In

2020, approximately 1 out of 10 children worldwide was engaged in work, accounting for

160 million child workers (International Labour Office and United Nations Children's

Fund, 2021). What is more troubling is that 79 million of these children are engaged in what is

considered to be hazardous child labor that endangers their safety. The determinants of child

labor are contextually diverse. They often include poverty, cultural views toward work, insuffi-

cient legal frameworks, and weak enforcement, among others. By extension, the policies to

combat child labor are also diverse. They include poverty alleviation schemes, changes in legal

and cultural norms, educational interventions, rights awareness campaigns, and child protec-

tion policies.

The Government of Costa Rica (GCR) created the NNAT (Niños, niñas y adolescentes

trabajadores) program to address child labor and hazardous child labor. The NNAT program's

objective was to reduce child labor by incentivizing school retention and reinserting youth into

public secondary schools. The program was designed to compensate the family for the opportu-

nity cost of income lost by a child attending school instead of working. The subsidy is expected

to reduce child labor, serving as an income effect. At the same time, a school enrollment condi-

tionality is expected to reduce child labor through a substitution effect from allocating time to

schooling. The main objective of the evaluation is to estimate the effects of the NNAT program

on youth beneficiaries' labor market, education, and health outcomes, specifically, child labor

and hazardous child labor participation, hours worked, school enrollment, attendance, and

grade completion. To accomplish this objective, four research questions were developed:

(1) What are the effects of the NNAT program on labor outcomes for program participants?

(2) What are the effects of the NNAT program on school outcomes for program participants?

(3) How has the health of program participants changed after receiving the subsidy? (4) What is

the program's cost-effectiveness, and how does it compare with similar interventions in other

countries?

The literature on conditional cash transfers (CCT) focused on addressing child labor has

been under constant development during the last two decades. De Hoop and Rosati (2013)

argued that CCTs enable household consumption smoothing and prevent youth from pursuing

work to support their families during economic shocks. De Hoop and Rosati (2014) also con-

ducted a systematic review of 30 cash transfer programs across 12 countries. They found that

cash transfers lowered participation in child labor and hours worked and discouraged parents

from using child labor to meet their household economic needs. Additionally, they found that

transfers have greater economic impacts on boys and larger decreases in household chores for

girls. Regarding schooling outcomes, the authors argued that there is little evidence of the effec-

tiveness of including schooling as a condition for the transfer in reducing child labor. Addition-

ally, they found that CCTs lower the risk of students dropping out due to economic shocks but

did not reduce child labor as a risk-coping strategy for families. De Janvry et al. (2006) use data

from Mexico's Progresa CCT program to study how adverse economic shocks (unemployment

or illness of the household head or natural disasters) can be offset in families protected by a

CCT program, particularly for school and child labor outcomes. Their findings show that stu-

dent beneficiaries were able to remain in school during negative economic shocks; however,

they were more likely to increase their labor participation.

Reynolds (2015) finds that an expansion of the Bolsa Familia CCT program in Brazil to

cover previously ineligible adolescents ages 16 and 17 years does not impact their time

MEZA-CORDERO 221