Do households resort to child labor to cope with income shocks?

Using four rounds of panel household data from the Kagera region of Tanzania, we show that transitory income shocks - measured by the value of crop lost by farming households - lead to significantly increased child labor. A one standard deviation increase in the shock is associated with a 10% increase in mean child working hours. Moreover, we find that households with collateralizable assets - which we interpret as a proxy for access to credit - are better able to offset the effects of income shocks. This evidence supports the view that credit market imperfections are an important determinant of child labor.