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Job loss and family adjustments in work and schooling during the Mexican peso crisis

Abstract

We use individual data from a panel of families during the depth of the peso crisis in Mexico to investigate whether the transition of the male household head from employment into unemployment affects the labor force participation of his spouse and children. We find that significant added-worker effects are in operation especially for adult females (wives), but no evidence that the labor force participation, the school attendance, and the likelihood of advancing to the next school grade of teenage males are influenced by the event of unemployment of the household head. The head's unemployment is significantly associated with a higher probability that teenage females do not attend school. However, lower attendance does not appear to impede their advancement to the next grade.

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Fig. 1

Notes

  1. There are two other strands of related literature focusing on the effects of aggregate or local economic conditions on child school enrollment and attainment. The first one is concerned with the effects of local aggregate conditions such as unemployment rates and job availability on the work and schooling of teenagers (Dellas and Sakellaris 2003; McKenzie 2003; Rice 1999; Ribar 2001; G. Rucci, unpublished data; Schady 2001). The second group consists of cross-country time series studies linking school enrollment and attainment to income and employment volatility (Behrman et al. 1999; Flug et al. 1998).

  2. For a broader analysis of the impact of the peso crisis and the coping strategies of Mexican households, see McKenzie (2003).

  3. Although we did not impose the restriction that the head of the household and his spouse need to be married, approximately 98% of the couples reported that they were married or in a liberal union.

  4. For example, based on the full sample of individuals in 1995-Q4, the proportion of non-coresident youths increases rapidly with age, while the rate of non-coresidence is about twice as high for females than it is for males, probably in reflection of the fact that females marry younger. Specifically, among 16-year-olds, only 0.4% of the males and 2.4% of the females were not co-residing with their parents. Among 19-year-olds, only 6% of the males and 14.4% of the females were not co-residing with their parents (H. Jacoby and E. Skoufias, unpublished data).

  5. It is important to keep in mind that the pooling of individual transition rates over the five quarters may differ from the individual transition rates over the period of five quarters.

  6. The same patterns for the labor force transition of female spouses are also observed when we did not restrict the sample to households with at least one teenage child between 12 and 19 years of age. The pattern observed for women in Mexico differs from that reported by Lundberg (1985) and Spletzer (1997) for women in the US, where typically, the employment and nonparticipation rates in the labor force among women are lower and the unemployment rate is higher.

  7. The transition rates were estimated including the reported attendance during the third quarter of the calendar year when schools are closed for the summer vacation. The findings on the transition rates did not change qualitatively when we recalculated transition rates excluding the third quarter. This is probably due to the fact that, during the third quarter, only half of the time is a vacation period (the summer vacation is typically from early July to mid-August).

  8. We have also defined school attendance based on whether a child reports simply positive hours in school-related activities without any qualitative change in our findings.

  9. We have also estimated a random-effects probit model, after rearranging our data appropriately, using the labor force status of the spouse in the current period as a dependent variable and the current unemployment status of her husband as an independent variable. Independently of the specification adopted for the vector X, the estimates of the coefficient β were also significantly positive, which suggests that much of the added-worker effect is contemporaneous. This finding, similar to the one reported by Spletzer (1997) for women in the US, is consistent with the interpretation that the husband's unemployment arrives unexpectedly.

  10. The full set of the estimated coefficients and variable means and standard deviations are available upon request directly from the authors.

  11. Moreover, these large differences in the marginal effects appear to be in effect in spite of comparable labor force entry rates in the two samples. In the US for example, among married women who are not in the labor force, 28.25% enter the labor force within 3 months of the husband's employment-to-unemployment transition, whereas in urban Mexico, the corresponding rate among adult females is slightly higher at 32. 32% (within a five-quarter period).

  12. We have also tried to present more concrete evidence using the limited information provided by the survey regarding hours spent during the last week on domestic activities. Ordinary least-squares regressions analogous to Eq. 1 using the weekly hours devoted to domestic activities as a dependent variable did not reveal any statistically significant differences in the domestic hours of teenage men and women in households with an unemployed head.

  13. It should be noted that when we use the subsample of children who attend school in both academic years, we find no significant effects of the father's unemployment shock. Thus, the unemployment shock does appear to delay progress even among those who are attending school both academic years.

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Correspondence to Emmanuel Skoufias.

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Responsible editor: Daniel S. Hamermesh

All correspondence should be addressed to Emmanuel Skoufias. We wish to thank Dan Hamermesh and an anonymous referee for especially helpful comments. Earlier versions of this paper were presented at IFPRI, the George Washington University, and the University of Pennsylvania. Agnes Isnawangsih provided excellent research assistance. The views expressed herein do not reflect those of the World Bank or CIDE.

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Skoufias, E., Parker, S.W. Job loss and family adjustments in work and schooling during the Mexican peso crisis. J Popul Econ 19, 163–181 (2006). https://doi.org/10.1007/s00148-005-0005-3

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Keywords

  • Added-worker effect
  • Child work
  • Job loss
  • Mexico
  • School attendance

JEL Classification

  • J22
  • D13