Is Child Work Necessary?

This paper investigates the hypothesis that child labour is compelled by poverty or that the child's income contribution is needed by the household in order to meet subsistence expenditures. We show that a testable implication of this hypothesis is that the wage elasticity of child labour supply is negative. Using a large household survey for rural Pakistan, labour supply models for boys and girls in wage work are estimated. Conditioning on non-labour income and a range of demographic variables, we identify a negative wage elasticity for boys and an elasticity that is insignificantly different from zero for girls. Thus while the evidence is consistent with boys working on account of poverty compulsions, the evidence is ambiguous in the case of girls. The results are argued to be of interest to recent theoretical and policy developments in this area.