Do International Labor Standards Contribute to the Persistence of the Child Labor Problem?

In recent years, a number of governments and consumer groups in rich countries have tried to discourage the use of child labor in poor countries through measures such as product boycotts and the imposition of international labor standards. The purported objective of such measures is to reduce the incidence of child labor in developing countries and thereby improve children's welfare. In this paper, we examine the effects of such policies from a political-economy perspective. We show that these types of international action on child labor tend to lower domestic political support within developing countries for banning child labor. Hence, international labor standards and product boycotts may delay the ultimate eradication of child labor.child labor, political economy, international labor standards, trade sanctions

Patience Capital and the Demise of the Aristocracy

We model the decision problem of a parent who chooses an occupation and invests in the patience of her children. The two choices complement each other: patient individuals choose occupations with a steep income profile; a steep income profile, in turn, leads to a strong incentive to invest in patience. In equilibrium, society becomes stratified along occupational lines. The most patient people are those in occupations requiring the most education and experience. The theory can account for the demise of the British land-owning aristocracy in the nineteenth century, when rich landowners proved unable to profit from new opportunities arising with industrialization, and were thus surpassed by industrialists rising from the middle classes.discount factor; patience; British aristocracy; Industrial Revolution; capital accumulation; income distribution

Occupational Choice and the Spirit of Capitalism

The British Industrial Revolution triggered a reversal in the social order of society whereby the landed elite was replaced by industrial capitalists rising from the middle classes as the economically dominant group. Many observers have linked this transformation to the contrast in values between a hard-working and frugal middle class and an upper class imbued with disdain for work. We propose an economic theory of preference formation where both the divergence of attitudes across social classes and the ensuing reversal of economic fortunes are equilibrium outcomes. In our theory, parents shape their children's preferences in response to economic incentives. This results in the stratification of society along occupational lines. Middle-class families in occupations that require effort, skill, and experience develop patience and work ethics, whereas upper-class families relying on rental income cultivate a refined taste for leisure. These class-specific attitudes, which are rooted in the nature of pre-industrial professions, become key determinants of success once industrialization transforms the economic landscape.

Technological change and the wealth of nations

We discuss a unified theory of directed technological change and technology adoption that can shed light on the causes of persistent productivity differences across countries. In our model, new technologies are designed in advanced countries and diffuse endogenously to less developed countries. Our framework is rich enough to highlight three broad reasons for productivity differences: inappropriate technologies, policy-induced barriers to technology adoption, and within-country misallocations across sectors due to policy distortions. We also discuss the effects of two aspects of globalization, trade in goods and migration, on the wealth of nations through their impact on the direction of technical progress. By doing so, we illustrate some of the equalizing and unequalizing forces of globalization.Barriers to Technology Adoption, Directed Technology Adoption, Endogenous Growth, Globalization, Human Capital, Inappropriate Technologies, Market Power, Political Economy, Skill-biased Technical Chan

Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits

We develop an equilibrium search-matching model with risk-neutral agents and two-sided ex-ante heterogeneity Unemployment insurance has the standard effect of reducing employment, but also helps workers to get a suitable job. The predictions of our simple model are consistent with the contrasting performance of the labor market in Europe and US in terms of unemployment, productivity growth and wage inequality. To show this, we construct two fictitious economies with calibrated parameters which only differ by the degree of unemployment insurance and assume that they are hit by a common technological shock which enhances the importance of mismatch. This shock reduces the proportion of jobs which workers regard as acceptable in the economy with unemployment insurance (Europe). As a result, unemployment doubles in this economy. In the laissez-faire economy (US), unemployment remains constant, but wage inequality increases more and productivity grows less due to larger mismatch. The model can be used to address a number of normative issues.

Occupational Choice and the Spirit of Capitalism

The British Industrial Revolution triggered a reversal in the social order whereby the landed elite was replaced by industrial capitalists rising from the middle classes as the economically dominant group. Many observers have linked this transformation to the contrast in values between a hard-working and thrifty middle class and an upper class imbued with disdain for work. We propose an economic theory of preference formation in which both the divergence of attitudes across social classes and the ensuing reversal of economic fortunes are equilibrium outcomes. In our theory, parents shape their children’s preferences in response to economic incentives. If financial markets are imperfect, this results in the stratification of society along occupational lines. Middle-class families in occupations that require effort, skill, and experience develop patience and work ethic, whereas upper-class families relying on rental income cultivate a refined taste for leisure. These class-specific attitudes, which are rooted in the nature of pre-industrial professions, become key determinants of success once industrialization transforms the economic landscape.Endogenous Preferences, Social Classes, Industrial Revolution

The macroeconomics of child labor regulation

We develop a positive theory of the adoption of child labor laws. Workers who compete with children in the labor market support the introduction of a child labor ban, unless their own working children provide a large fraction of family income. Since child labor income depends on family size, fertility decisions lock agents into specific political preferences, and multiple steady states can arise. The introduction of child labor laws can be triggered by skill-biased technological change that induces parents to choose smaller families. The model replicates features of the history of the U.K. in the nineteenth century, when regulations were introduced after a period of rising wage inequality, and coincided with rapidly declining fertility rates.Child labor

Productivity Differences

Many technologies used by the LDCs are developed in the OECD economies, and as such, are used to make optimal use of the skills of these richer countries' workforces. Due to differences in the supply of skills, some of tasks performed by skilled workers in the OECD economies will be carried out by unskilled workers in the LDCs. Since the technologies in these tasks are designed to be used by skilled workers, productivity in the LDCs will be low. Even when all countries have equal access to new technologies, this mismatch between skills and technology can lead to sizeable differences in total factor productivity and output per worker. Our theory also suggests that productivity differences should be highest in medium-tech sectors, and that the trade regime and the degree of intellectual property right enforcement in the LDCs have an important effect on the direction of technical change and on productivity differences.Development; Directed Technical Change; Intellectual Property Rights; Skills; Technology; Total Factor Productivity