Even though topics related to child labour and school dropout have been studied worldwide, little attention has focused in the least-developed countries. This paper examines the impact of child labour on school dropout by using national representative data surveyed in the Lao PDR, which serves as a case study of a least-developed country. Using an average wage of children by province as an instrumental variable, findings indicate that child labour, especially with regard to girls, has a strong impact on driving school dropout. Parental educational attainment, particularly mother's education, seems to show a significant effect on reducing the probability of dropping out. Our evidence supports the need to provide free education programs that have not yet been established in least-developed countries such as the Lao PDR. At the very least, given limited government budgets, support can be targeted to help vulnerable groups and poor families.

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