Peer Effects in Child Work Decisions: Evidence from PROGRESA Cash Transfer Program

Abstract This study examines the spillover effects of the PROGRESA program on ineligible children’s participation in economic activities by exploiting the randomized design of the intervention and employing an instrumental variable strategy. We find that the incidence of child work among ineligible children is strongly affected by peer group’s child work decisions. We also find that peer group school attendance has a significant but smaller effect on ineligible children’s participation in economic activities. Our findings are relevant for policy makers as they show that cash transfer programs can have an indirect spillover effect on child work.