We analyze child labor incidence in small industries in Indonesia at the village level.
Using a data set of all Indonesian villages and urban neighborhoods we find that child
labor is significantly associated with poverty, natural and epidemic disasters, and with
unemployment. It is negatively associated with credit and school availability, only if we
correct for the existence of small industries in that village. Our results thus confirm the
importance of school availability and credit provision as policy instruments to reduce
child labor. They also show that it is imperative to look at the interplay of demand
and supply determinants of child labor to arrive at unbiased results and correct policy
conclusions.