Income Shock and Child Labour: Revisiting the Poverty Link.

This article theoretically examines the impact of recessionary income shocks, such as those triggered by the COVID-19 pandemic, on household decisions regarding child labour (CL) in India. It develops a model that endogenizes parental altruism and adult labour supply choices, showing that income shocks have an ambiguous overall effect on CL but tend to increase child labour in regions with a high cost of living. The analysis further finds that when wages are rigid, recessions can both induce child labour and exacerbate poverty, while policy interventions like in-kind transfers (e.g., mid-day meal programs) that reduce living costs consistently decrease child labour. The study highlights the complexity of the poverty–child labour relationship across Indian states and underscores the importance of targeted social policies to mitigate recession-induced increases in child labour.