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AbstractThis study analyses the effect of cash transfers, aimed to increase children's human capital, on youth and adult labour supply. We provide novel results from the evaluation of two programmes: the conditional cash transfer Pantawid in the Philippines and the unconditional cash transfer Child Grant Programme in Lesotho. The transfers did not discourage youth and adult work. However, marginal adjustments emerged: the Child Grant Programme decreased youth and adult occasional work, representing the last resort to cope with income vulnerability; the Pantawid did not influence youth work but increase adult wage work, with a reduction of family work, indicating that the transfer decreased transaction costs associated with labour market access. © 2018 John Wiley & Sons, Ltd.

Decisions concerning child labour, education and nutrition are taken by parents simultaneously with decisions affecting fertility and infant mortality. This implies that child labour cannot be abolished without altering the conditions that make it optimal for parents to make their children work. Such conditions can be altered not only by educational policies, such as free or subsidized provision of school facilities, but also by more broadly aimed policies, such as sanitation or preventive medicine.

The causes and consequences of child labour are examined theoretically and empirically within a household decision framework, with endogenous fertility and mortality. The data come from a nationally representative survey of Indian rural households. The complex interactions uncovered by the analysis suggest that mere prohibition of child labour, or the imposition of school attendance, could make things worse, and would be difficult to enforce. Beneficially reducing child labour requires changing the economic environment to which the work of the children constitutes, in the great majority of the cases, the rational response. Suitable policies include reductions in the cost of attending school, and public health improvements. The effects of these policies go far beyond direct impacts. Health policies have favourable indirect repercussions on the school attendance, demand for educational material, and labour participation of children. Educational policies have favourable indirect repercussions on the nutritional status of children. Both types of policies discourage fertility. Income re-distribution may be helpful, but land re-distribution could be counterproductive.