Intrinsic Competition and the Labor-Schooling Trade-off in Uganda Competition in Child Labor and Schooling Decision Making in Uganda. Evidence from a Bivariate Probit Model

I argue that a households interdependent decisions over their childrens labor and school activities are not only a function of observable hard facts but also of its intrinsic values and beliefs. Applying econometric methods, after all observable factors have been controlled for, the degree to which these joint decisions over these two activities are correlated can be seen as the intrinsic competition households and children face. This coefficient of the labor-school trade-off is not associated with any observable variables and should therefore be object of future research in the field. In the empirical study, quite recent and hardly discussed data from Uganda is used for the joint estimation of child labor and school attendance applying a bivariate probit model. The results shed light on the degree of the unobserved or intrinsic competition between labor and school attendance. Results implying a stronger trade-off between these two decisions in urban than rural areas and stronger for girls than for boys are obtained. Especially rural boys have a considerably higher tendency to combine their labor activities with schooling while the obtained trade-off implies for girls to specialize. Results seem to be driven by unobserved cost-related factors, no clear explanation on this, however, is found.