FORENOTE:

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Despite the recent progress made, poverty remains a critical development challenge in Tanzania. The high economic growth seen during the past decade has not made notable strides in poverty reduction. Over a third of the population lives below the national poverty line. Rural population, in particular are trapped in a slow growing agriculture, their mainstay, and thereby in a status of low income as opportunities are limited. Rural poor are also subject to a plethora of shocks, some such as droughts, floods and pest attacks on crops, affecting their income. Formal coping mechanisms to shocks such as crop insurance and social protection either do not exist or are extremely limited. Limited household asset holdings and credit constraints also restrain their coping strategies. In such circumstances households tend to use child labor as a buffer against such shocks in smoothing household consumption. The use of child labor and child labor bonding is seen in Sub-Saharan African countries when households are either do not have or reluctant to sell their assets during extreme shocks (Fafchamps, 1999; Barett et al. 2000).

 

A close relationship between transitory income shocks and child labor has been reported for rural Tanzania (Beegle, Dehejia and Gatti 2005). This is not surprising given the limited low farm income, their exposure to shocks and limited coping arrangements, formal or informal. Child labor, whether it is used as a buffer against household income shocks or a result of non-income shocks, tend to interfere with the development of child’s human capital with long term adverse consequences on the socio-economic development of the country. This is particularly relevant when Tanzania is looking forward to push for a paradigm shift in economic development where human capital will play a critical role. As such, understanding the underlying reasons for child labor and investigating mechanisms that help reduce such outcomes could help proper policy design and implementation at the national level.

Theoretically, the proposed research relates to the permanent income hypothesis and consumption smoothing. In this literature, in the absence of formal coping strategies such as insurance or assets holdings or access to credit as buffers, households tend to use alternative coping mechanisms in the presence of shocks in smoothing household consumption (see for example, Zeldes 1989, Townsend 1994, Chaudhuri and Ravallion 1997 and Morduch 1999). This also relates to recent literature on the role of credit constraints in explaining child labor (Baland and Robinson 2000 and Rajan 2001) and to the buffer stock literature (Deaton 1992). Access to credit is a critical issue in most Sub-Saharan African countries including Tanzania and this particular approach could be very relevant to Tanzania.

 

For the purpose of this study, we have in mind one of the two approaches. One relates again to consumption smoothing literature. A model of utility maximization is one approach. A second approach (most widely used in literature) is an ad-hoc fixed effect model that allows accounting for various factors affecting child labor.

 

Although heterogeneous in many respects, most Sub-Saharan African countries seem to share similarities in coping strategies to shocks given their low income status and limited access to credit and crop insurance or other social protection mechanisms at times financial distress. As such findings of this research could be well used for policy advocacy at the regional level as well.

The use of either a model that maximizes household utility or a fixed effects model will be considered depending on how far the research would go in analyzing the relationship between non-income shocks and child labor. Regardless of which approach is used, it would give a good theoretical underpinning for the study.

 

The intension is to apply Probit regression techniques using National Panel Survey (NPS) Data for Tanzania. NPS data are available for two phases (2009 and 2011) and are not used for any analytical research so far as it has only confined to reporting basic results. The socio-economic context has changed substantially since undertaking similar studies as Tanzania has moved to a high growth path since early 2000 and made progress in several social fronts as well. As such, the new data set would give this research an edge over past studies and enable to throw new light on recent developments on the subject.

 

An analysis of policy implications will be presented along with policy recommendations to address them in a developing country/Tanzanian context.