Cash for class - an investigation into child labour and enrolment subsidies in Peru

Abstract: With high rates of child labour as a result of extensive poverty in Peru, measures are needed to protect children from exploitation. The conditional cash transfer (CCT) programme Juntos provides enrolment subsidies to incentivise sending children to school, with an indirect goal of keeping them out of the labour market. Previous research however indicates that Juntos beneficiary children engage in more unpaid labour than expected. Using ordinary least squares (OLS) regressions, we therefore test the effect of the programme on unpaid labour and whether a gender differential in the effect exists. Propensity score matching allows us to confirm our initial OLS results that show that Juntos participation results in increased unpaid child labour, with a particularly strong effect for beneficiary boys. Using these results, we focus testing on our primary data in order to understand the mechanisms behind this effect. Through OLS regressions we find that investment of the Juntos transfer in the family business increases the incidence of unpaid labour, especially for boys. We conclude that unpaid child labour is strongly affected by cash transfers and wish to initiate a discussion regarding the effectiveness of CCT programmes in countries with high school enrolment rates.