Inequality, Productivity, and Child Labor: Theory and Evidence

A recent theoretical literature has linked reductions in income inequality to reductions in child labor in countries that are relatively well-off, but has not explored how income distribution affects child labor in very poor countries. We show that while in higher-productivity countries with child labor, a more equal income distribution will reduce or eliminate child labor, in low productivity countries, a more equal distribution of income will exacerbate child labor. Econometric specifications studying child labor among 10- to-14 year olds yield results generally consistent with these predictions. Policy actions that aim to bring about more equality so as to reduce child labor will likely not have the desired effect unless a country in which they are taken is sufficiently wealthy.

Does Child Labor Decrease When Parental Incomes Rises

In the presence of two-sided altruism, i.e., when parents and children care about each other's utility, increases in parental income need not always lead to increases in schooling and to decreases in child labor. This surprising result derives from the systematic way capital market constraints bind as parental income rises: child labor increases as soon as parental income rises by enough to eliminate transfers from children to parents.

A Theory of Exploitative Child Labor

We develop a model of exploitative child labor with two key features: first, parents have imperfect information about whether employment opportunities available to their children are exploitative or not. Second, firms choose whether or not to exploit their child workers. In our model, a ban on exploitative child labor is desirable, because it resolves the problem of imperfect information faced by parents, and therefore leads to Pareto efficiency. We also find that a ban leads to an increase in the wages of child workers, and that firm profits, even for firms that do not exploit child workers, fall. Finally, a ban has ambiguous effects at the macroeconomic level: aggregate child employment and aggregate output can rise or fall.

A Theory of Exploitative Child Labor

Child labor laws should aim to protect children who work, instead of trying to remove children from work. In this paper, we identify an instance when the risk of exploitation lowers the expected bene…t of child labor to the child,and therefore suppresses child labor force participation. Targeted legal intervention that lowers or removes the risk of exploitation raises child participation in the labor market, child welfare, and overall societal welfare. Targeting on child labor more broadly may reduce child labor force participation, child welfare, and overall societal welfare. Our key assumptions for generating these results are that parents decide for each child based on their child's best interest, that parents face imperfect information about the risks their children confront upon entering the labor market, and that firms may choose to exploit this information imperfection by employing children under forced-labor-type conditions.child labor, exploitation

Slave Redemption When it Takes Time to Redeem Slaves

We analyze slave redemption programs—the buying of slaves to give them their freedom--in a simple matching model, i.e., under the assumption that it takes time to find slaves to buy or sell. Unlike in a supply and demand framework, where sufficiently large and effective redemption programs must lead to an increase in the price at which slaves are exchanged, we find that such programs do not necessarily raise the price of slaves. We also use the model to explain why a slave redemption program can slow the flow of people into the actual state of slavery, but at the same time can increase the number of people captured to be slaves. We present contemporary examples to suggest that the weight that should be assigned to costs inflicted on the extra captured people, versus the benefits enjoyed by those redeemed, depends critically on the nature of the experience at, and just after, capture.slavery, matching models

A Theory of Exploitative Child Labor

We develop a model of exploitative child labor with two key features: first, parents have imperfect information about whether employment opportunities available to their children are exploitative or not. Second, firms choose whether or not to exploit their child workers. In our model, a ban on exploitative child labor is desirable, because it resolves the problem of imperfect information faced by parents, and therefore leads to Pareto efficiency. We also find that a ban leads to an increase in the wages of child workers, and that firm profits, even for firms that do not exploit child workers, fall. Finally, a ban has ambiguous effects at the macroeconomic level: aggregate child employment and aggregate output can rise or fall.child labor, economic exploitation

What Policy Guidance Does the Literature Provide on the Relationship Between School Quality and Child Labor?

[Excerpt] Satisfying a mandate assigned by the Trade and Development Act (TDA) of 2000, the United States Department of Labor reports annually on the worst forms of child labor in over 140 countries around the world. Since 2009, the reports have included recommendations for actions that countries might take to reduce child labor. The purpose of this paper is to use the existing research literature to assess whether and when a discussion of school quality and a policy emphasis on it might be part of the TDA reporting and its follow-on recommendations. This assessment finds little clear guidance from available empirical work. Although it is large, the literature generally does not suggest a consensus view on what defines (or measures) school quality. As a result, the literature lacks robust empirical regularities to suggest when and how to intervene on school quality so as to affect child labor and other variables that might be related to it (e.g., school enrollment). Theory is more conclusive, at least in suggesting when. It suggests that in circumstances when the root cause of child labor is not poverty, improving school quality can have a positive impact toward its elimination. But theory also suggests that when there is poverty, an emphasis on school quality may increase child labor. The precise line defining poverty needs itself to be established empirically, so cautious guidance from theory is to emphasize school quality as a tool for eliminating child labor only in situations that are – by judgment call - undoubtedly well-enough above or below the “poverty line,” and where poor school quality is an established fact. After reviewing the state of empirical and theoretical work, this paper concludes with a discussion on how two current trends in development policymaking and research – recipient involvement in the design of policy interventions and randomized control trial evaluation – might point the way to eventually being more precise about when and how an emphasis on school quality is important to eliminating child labor.ILAB_What_policy_guidance_on_the_relationship_between_school_quality_and_child_labor.pdf: 19 downloads, before Oct. 1, 2020

Minimum Wages in an Equilibrium Search Model with Diminishing Returns to Labor in Production.

This article analyzes a minimum wage in a market with imperfect information and job search. It establishes that employment effects of a minimum wage do not generally indicate welfare effects. It shows that researchers interested in welfare consequences should ask two questions. First, is the existing minimum wage binding? Second, do some firms that would be bound by a new minimum wage presently experience labor shortages? If the answers to these questions are no and yes, respectively, this article supports the conclusion that a higher minimum wage is welfare improving, regardless of its effect on the unemployment rate. Copyright 1996 by University of Chicago Press.

A Model of Informal Sector Labor Markets

Abstract: When labor standards signal where desirable jobs are, they alter the jobmatching process, with the result that both aggregate output and employment can rise. Our model distinguishes formal-sector from informal-sector firms by their compliance with labor standards. Formal-sector firms comply. Informal-sector firms do not. Workers prefer formal-sector jobs, and take informal-sector jobs only to tide themselves over while searching in the formal sector. To gain access to more workers, more productive employers join the formal sector. JEL Codes: O17, J8, J6