UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACTS OF HEALTH SHOCKS ON CHILD LABOR: EVIDENCE IN VIETNAM BY NGUYEN THI HA GIANG MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, December 2017 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACTS OF HEALTH SHOCKS ON CHILD LABOR: EVIDENCE IN VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYEN THI HA GIANG Academic Supervisor: DR LE VAN CHON HO CHI MINH CITY, December 2017 i DECLARATION I hereby declare that my thesis entitled “Impacts of health shocks on child labor: An evidence from Vietnam” is the result of my own work and includes nothing which is the outcome of work done in collaboration except as declared in the Preface and specified in the text My dissertation is not substantially the same as any that I have submitted, or, is being concurrently submitted for a degree or diploma or other qualification any other University or similar institution except as declared in the Preface and specified in the text I further state that no substantial part of my dissertation has already been submitted, or, is being concurrently submitted for any such degree, diploma or other qualification at any other University or similar institution except as declared in the Preface and specified in the text Date: September 20, 2017 Signature Full name: Nguyen Thi Ha Giang ii ABSTRACT Base on household decisions relating to child labor, this paper employs the Young Lives Dataset and Heckman’s selection model to explore the impacts of health shocks on child labor in Vietnam during the period of 2006-2009 This study also considers whether the buffering effect of asset holdings and access to credit are existence to cushion the impact of health shocks on child labor The main findings indicate health shocks only impact on the decision send the child to work, meaning increase the probability of the child labor participation Asset holdings is the significant mechanism to households coping with health shocks Also, the buffering effect of assets on the child labor participation is found However, the access to credit is not significant in both functions Additionally, poverty still remains as the crucial factor to determine child labor JEL Classification: D13, J13, J22, O12 Keywords: child labor, health shocks, buffering effect, heckman’s selection model Abbreviations: December 2017 iii Table of Contents ABSTRACT iii CHAPTER I: INTRODUCTION 1.1 Problem Statement and Significance of Research 1.2 Research Objectives and Research Questions 1.3 Scope of the study 1.4 Structure of Thesis Design CHAPTER II: LITERATURE REVIEW 2.1 Economic Child Labor 2.2 Impacts of Health Shocks on Household Outcome 10 2.3 Response of Household with Health Shocks 12 2.4 Health Shocks and Child Labor 15 CHAPTER III: RESEARCH METHODOLOGY 19 3.1 Research Methodology 19 3.1.1 Analytical Framework 19 3.1.2 Econometric Model 22 3.2 Vietnam Young Live dataset Overview 28 CHAPTER IV: RESULTS AND DISCUSSION 29 4.1 Descriptive statistics 29 4.2 Regression results 32 CHAPTER V: CONCLUSION AND POLICY IMPLICATIONS 40 REFERENCES 42 APPENDIX 46 iv The list of Table and Figure Table 1: Variable Definition 27 Table 2: The child’s work hour following gender and the type of site 29 Figure 1: The graphical relation between the child work hour and the child age 29 Table 3: Distribution of child labor following the child age 30 Table 4: Description of health shocks 30 Table 5: The statistical description health shocks and child labor 31 Table 6: Description of using variables 32 Table 7: Results of Heckman’s selection model 33 Table 8: Marginal effect on the child labor participation function 34 v CHAPTER I: INTRODUCTION 1.1 Problem Statement and Significance of Research Child labor and health shocks are interesting topics in both pieces of research as well as policy aspects, especially in developing countries Most of all governments admit the important role of children protection and of constructing a good environment for the child development (UNESCO, 2008) Therein, child labor reduction is one of the main goals that numerous international organizations and governments are trying to achieve the improvement Regarding health shocks, many studies indicate its wide range of negative impacts on household outcome including children’s life (Beegle et al, 2004; Dilion, 2012; Alam & Mahal, 2014) Understanding deeply both research areas and linking them together create a valuable research direction and still useful to contribute to the child development Related to this connection, this paper puts health shock’s consequence and child labor work together in order to explore, interpret and build an improvement for the child development in Vietnam and developing countries as well The below presentation will bring a whole picture to access this issue as well as provide grounds that this research is to deserve your attention Regarding health shocks, these are the important sources of household risks in developing countries, which are able to raise negative potential impacts on household outcome such as income reduction, out of expenditure and unbalancing labor supply In addition, psychological problem and the persistence of serious disease may be the longterm effects on the life of families (Alam & Mahal, 2014) Health shocks are considered as idiosyncratic risks that are difficult to predict as well as being costly household budget (Wagstaff, 2007; Bandara et al, 2015; Mitra et al, 2016) Following World Bank (2017), the crude death rate (per 1000 people) in Vietnam increases significantly during the period of 2002-2014, from 5.521% to 5.815% The one main cause of death comes from the cardiovascular diseases and diabetes (WHO, 2015) According to the report of Hanoi School Public Health (2016), the total health expenditure in Vietnam increases from 5.2% of GDP to 6.9% of GDP, at nearly 191,000 billion VND in 2014, where the private healthcare spending constitutes more than 52% of the total healthcare expenses In particular, the healthcare expenditure of each household experiences a rise of $11.4 in 2002-2014 per month, reaching about 116 USD each year It is noticed that the health care cost still remains as the catastrophic expenditure which the rate of out of pocket expenditure and the private expenditure on health accounts for more than 80% (2014), compared with 45.5% of that of the world (World Bank, 2017) In other words, the high healthcare spending can lead a burden that can push households to impoverishment Besides, results from other studies in Vietnam provide various empirical evidences about negative impacts of health risks such as earned income reduction, out of pocket expenditure, reducing labor productivity and falling the individual's BMI (Wagstaff, 2006; Van Minh et al, 2012, Bales, 2013) Therefore, it is not difficult to admit that health shocks create disturbances in the household life and should be noticed in a developing country like Vietnam Under pressure of health shocks, households will apply different strategies in order to protect their life become more stable There is a wide range of different coping strategies that families can consider to respond the health shock’s consequence such as using savings, trading livestock, selling assets, accessing the credit, changing household labor supply, especially including the using of child labor (Bandara et al, 2015; Bonfer & Wright, 2016) Under the shortage of budget and labor force, parents may decide to send their children to enter into the labor market without other mechanisms (Basu &Van, 1998) Children may spend more time to work to find income for solving the smooth consumption problem or substituting employment for people occurring the health risks and caring patients as well Besides, when household members occur the death or illness, children are also aware of their hard circumstances and desire for helping their families In another aspect, the demand for unskilled labor as child labor might remain in a high level of lowincome and middle-income countries, where the agricultural sector plays an important role Furthermore, if households occur health shocks, using child labor in these areas is expected to increase more than others (Brown et al, 2002) The involvement of children in the workforce can have the negative impacts on childhood as well as children’s future life (ILO, 2013) In other words, when children spend more time for work activities than study or leisure, their human capital are difficult to remain in the good status Besides, child labor can relate to the poor nutrition and survival of children as well In several cases, children even have to work the much hours and overtake their ability, and this can generate the huge vulnerable sequels on children Some children even cannot attend school, others seem to lose the life as normal children A research of Beegle et al (2004) find the significant negative effect of child labor on school attainment in the Vietnam As the results, child labor also can reduce the human capital of the child while the child’s contribution plays a vital role in raising economic development in the future Indeed, child labor still exists although it is prevented by many international conventions as well as domestic laws For the legislation of child labor, Vietnam government gives some decisions related to lessening the employment of children In distance, Vietnam sanctioned the international conventions for children rights such as the Worst Forms of Child Labor Convention (Ratifications of C182) in 2000 and Convention Concerning Minimum Age for Admission to Employment of ILO (C138) in 2000 In the internal nation, the Vietnamese government passed the amended Labor Code in 2012 prohibits the child labor under the age of 15, excluding some exceptions; Circular No.10/2013/TT/LDTBXH (2013) listed occupations and locations where adolescent labor is prohibited Besides, it takes into account for Decision No 1023/QD-TT issued by Vietnam's Prime Minister in June 2016 about the national project of preventing and minimizing child labor This program will take place over the period 2016-2020, with main targets are to attack illegal child labor, lessen child labor as well as protect the childhood before the sequel of child labor by providing various opportunities development to children However, the number of children attending economic activities in Vietnam still remains at around 2.83 million individuals, responding nearly 86% in rural area, and 1.315 million children belonged to hazardous labor (Viet Nam National Child Labor Survey, 2012) Also, the survey indicates that children aged from 5-17 those who not attend school result in doing the salaried work and chores as well as incapable of education investment, around 21% and 9.2% respectively Therefore, it cannot be denied that although there are various efforts of the government to protect children rights, child labor is still persisted Above overview poses interesting stories to study in both topics of child labor and health shocks in Vietnam Many specific studies also focus on the consequences of risk events on the household outcome, especially impacts of health shocks and coping strategies (Wagstaff, 2007; Mitra et al, 2015) Besides, many researches relate to children and child labor (Rosati & Tzannatos, 2000; Edmonds & Pavcnik, 2002; Beegle at al, 2004) However, the relationship between health shocks and child labor seems to be a gap This paper will connect both child labor and health shocks work together Besides, this study also considers whether other mechanisms such as household own asset and access the credit can help households coping with these risks to instead of using the child employment In other words, whether the existence of the buffering effect of asset holdings and access to credit on child labor when households experience health shocks From there, the paper can give some recommendations to assist families in protecting childhood through mitigating child labor in Vietnam 1.2 Research Objectives and Research Questions The study focuses on the main objective is to consider the impacts of health shocks on child labor in developing countries, using Vietnam's Dataset as an example Particularly, the paper will explore the change of children's working time when households experience one or several shocks related to health such as the death or illness of the family member Besides, the paper considers some other mechanisms that households can use to reduce the impacts of health shocks on child labor (if it exists) In order to achieve objectives, the study will find the answer to two research questions (i) The first question: if a family experienced health risk events such as death, illness of household members, the child labor will increase or not? (ii) The second question: whether other mechanisms such as accessing the credit, asset holdings can reduce the negative effects of health shock on child labor? 1.3 Scope of the study The study focuses on the relationship between child labor and health shocks, both subjects are interesting stories to explore as well as improve for developing countries Using a longitudinal dataset for Vietnam from Young Live project of UK, the paper employs data from 2006 and 2009 responding with child labor ranking from to 16 years old 1.4 Structure of Thesis Design This study is organized as following manners Chapter presents some related theories and empirical studies about economics child labor, the consequence of health shocks on the household outcome, household responses with health shocks and the relationship of health shock and child labor Chapter shows the research methodology including the theoretical model and estimate model as well as an introduction to Vietnam Young Live dataset The data statistical description, estimation results, and discussions will be illustrated in Chapter The final Chapter will give some remarkable conclusions Table 7: Results of Heckman’s selection model Child Labor Child Work Hour Participation 0.71* -1.23 (1.67) (-1.36) Poverty 0.15* 0.34** (1.92) (2.12) Household Size 0.07*** 0.12** (3.03) (2.26) Age 0.70*** -0.90*** (12.65) (-4.24) Squared Age -0.02*** 0.05*** (-8.13) (5.51) Boy -0.26*** 0.12 (-4.90) (1.02) Mother’s Education -0.01 -0.02 (-0.55) (-1.06) Father’s Education -0.02* -0.04** (-1.71) (-1.99) Father Dead 0.07 -0.95 (0.19) (-1.36) Mother Dead 1.17 -1.07 (1.28) (-0.92) Father works in Agriculture 0.29*** -0.01 (3.04) (-0.05) Father Works in Non-agriculture 0.26*** -0.12 (2.74) (-0.54) Mother Works in Agriculture 0.07 0.05 (0.74) (0.27) Mother Works in Non-agriculture 0.04 -0.20 (0.44) (-1.03) Crop Shocks 0.16** -0.06 (2.13) (-0.44) Urban -0.97*** -0.17 (-10.06) (-0.72) Asset Holdings -0.06** -0.16** (-2.10) (-2.43) Asset Holdings x Health Shocks -0.10** 0.15 (-2.00) (1.50) Loans (0.06) -0.03 (-0.98) (-0.22) Loans x Health Shocks 0.17 0.24 (1.32) (0.89) Northern Uplands 0.94*** (9.53) Red River Delta 0.46*** (5.25) Central Coastal 0.83*** (9.76) _cons -5.29*** 8.90*** (-13.48) (5.29) -0.89*** Inverse Mills ratio (lambda) Wald chi2(20) = 141.97 (-2.85) Prob > chi2 = 0.0000 3880 Number of observations Censored observations 2767 1113 Uncensored observations Notes: t statistics in parentheses; * p