Rainfall variability, child labor, and human capital accumulation in rural Ethiopia
How does income uncertainty affect human capital investments in agrarian economies? Using child-level panel data, I exploit a medium-run change in mean-preserving rainfall variability to identify the effects of income uncertainty on the child labor decisions and human capital investments of smallholder farmers in rural Ethiopia. I estimate that increased rainfall variability is associated with less child labor and more schooling, consistent with a diversification mechanism. These findings highlight the empirical relevance of income uncertainty for decision making and household investment in rural economies. I find no evidence that rainfall variability is associated with past, present, or future rainfall, nor with income, wealth, and agricultural outcomes. As such, residual variation in realized income shocks?the main confounding interpretation?does not appear to explain the results. ? 2020 Agricultural & Applied Economics Association
5 May 2021
American Journal of Agricultural Economics 103(3) , pp.858-877, 2021
https://onlinelibrary.wiley.com/doi/10.1111/ajae.12128
This Journal article is published under the centre's Growth programme.