Estimating the Effect of Fertility Decisions on Child Labor and Schooling

We use an econometric model of fertility and children’s activities to examine the causal effects of fertility on a child’s activities taking the endogeneity of fertility into account. Our specification is nonlinear and simultaneous and uses latent factors to allow for unobserved influences on fertility to affect a child’s activities. We apply maximum simulated likelihood (MSL) techniques to estimate the parameters of our models. We find that the effect of fertility has a large downward bias in naive models. The effect of fertility on the probability of attending school is twice as large once its endogeneity is taken into account. The effect of fertility on the probability of work changes sign and becomes statistically significant