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Project Description

How health insurance can help prevent child labor

A randomized control trial evaluation shed light on how a micro health insurance innovation targeting poor households in Pakistan reduced child labor and hazardous work.

For many, the term “childhood” generally evokes oblivious times spent between school benches and playgrounds, but many children experience another reality. Millions of school-aged youth around the world spend their day at work, often involved in hazardous activities that put them at risk and badly impact their health. Youth obliged to work for their own survival or to provide for their families rarely complete basic schooling and are thereby denied the opportunity to investing in a better life.

Twenty percent involved in child labor in Pakistan

Children face a particularly dire situation in Pakistan. Estimates by the International Labor Organization (2004) predicted 12.5 million Pakistani children aged 5 to 17 to be involved in child labor in 2012, which represents nearly 20 percent of the age category. A majority of these children work in agriculture, while others are employed in brick or glass bangles making, surgical instruments manufacturing, or carpet weaving.

Child labor is a common consequence of economic shocks in many developing countries. As an overwhelming majority of people in Pakistan are not covered by health insurance, if a parent becomes sick, or passes away, it is common for one or several children of the family to drop out of school and start working to compensate for the loss of parental income and provide for their family.

NRSP’s health insurance…

The National Rural Support Programme (NRSP), a Pakistani NGO, set out to address this issue through an extension of a health and accident insurance scheme. By enabling households to reduce health-related expenses, NRSP expected to improve their capacity to manage shocks, and hence reduce the need for households to resort to child labor to cover unforeseen expenses. In order to help NRSP assess the impact of their innovative insurance package, randomly selected control and intervention branches were compared in urban Hyderabad using data collected in household panel surveys.

… and how it led to a drop in child labor

The evaluation showed that the intervention generated several positive social impacts. In addition to leading to a significant increase in coverage and usage of the health insurance, the extension innovation led to a decrease of child labor of 3.4 percentage points. Furthermore, the risk of hazardous occupations decreased by 4.6 percentage points. Monthly child labor earnings also dropped and the average number of hours worked by children was reduced by 1.8 hours per week. The program particularly benefitted boys, who were also generally more often engaged in child labor.

After these encouraging results, NRSP decided to scale it up to 500 further villages, as a first step. The program has high policy relevance, as the national government is interested in expanding social health protection and plans to implement similar policies all over Pakistan.

Young villagers look on in Ath Maqam, in the Neelum Valley, Pakistan, October 19, 2005

Young villagers in the Neelum Valley, Pakistan

A summary of the results of this impact evaluation is published in the Journal of Health Economics:

LANDMANN, FRÖLICH (2015): Can health-insurance help prevent child labor? An impact evaluation from Pakistan, Journal of Health Economics, 39 (2015), 51-59.