Monday, Dec 1
This paper uses longitudinal employment survey data to analyze the impact of household economic shocks on the schooling and employment transitions of young people in metropolitan Brazil. The analysis is based on data from Brazil's Monthly Employment Survey (PME) from 1982 to 1999, using observations for over 100,000 children age 10-16. Taking advantage of the rotating panels in the PME, we compare households in which the male household head becomes unemployed during a four-month period with households in which the head is continuously employed. Our bivariate probit regressions indicate that an unemployment shock significantly increases the probability that a child enters the labor force and decreases the probability that the child advances in school. The effects can be large, implying increases of as much as 60% in the probability of entering employment for 16 year-old girls. We find that shocks occurring in the following year do not have significant effects, suggesting that our results are not due to unobserved characteristics of households that experience unemployment shocks. Our results suggest that some households are not able to absorb short-run economic shocks, with negative consequences for children.