Poor households in developing countries, such as Pakistan, are especially vulnerable to economic shocks. They often have limited access to savings, credit and tangible assets. As a consequence, households might have to sell productive assets important for long-term income generation, and/or reduce consumption. This paper, published by the Institute of the Study of Labor (IZA), provides evidence on the effects of insurance on child labour. The authors exploit the extension of an accident and health insurance scheme offered by the National Rural Support Program (NRSP), a large MFI in Pakistan, which was set up as a randomized control trial and accompanied by household panel surveys. Together with increased coverage, the MFI offered assistance with claim procedures in treatment branches. The article concludes that insurance coverage leads to higher perceived protection and makes parents more confident to leave children out of work and instead allows them to visit school more regularly.
Institute for the Study of Labor (IZA)