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Welfare Impact Of A Ban On Child Labor

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  • JORGE SOARES

Abstract

"This article presents a new rationale for imposing restrictions on child labor. In a standard overlapping generation model where parental altruism results in transfers that children allocate to consumption and education, the Nash-Cournot equilibrium results in suboptimal levels of parental transfers and does not maximize the average level of utility of currently living agents. A ban on child labor decreases children's income and generates an increase in parental transfers bringing their levels closer to the optimum, raising children's welfare as well as average welfare in the short run and in the long run. Moreover, the inability to work allows children to allocate more time to education, and it leads to an increase in human capital. Besides, to increase transfers, parents decrease savings and hence physical capital accumulation. When prices are flexible, these effects diminish the positive welfare impact of the ban on child labor." ("JEL" D91, E21) Copyright (c) 2010 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 48 (2010)
Issue (Month): 4 (October)
Pages: 1048-1064

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Handle: RePEc:bla:ecinqu:v:48:y:2010:i:4:p:1048-1064

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References

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  1. Boyan Jovanovic & Peter L. Rousseau, 2005. "General Purpose Technologies," NBER Working Papers 11093, National Bureau of Economic Research, Inc.
  2. Dirk Krueger & Jessica Tjornhom Donohue, 2004. "On the Distributional Consequences of Child Labor Legislation," NBER Working Papers 10347, National Bureau of Economic Research, Inc.
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  4. Valerie A. Ramey & Neville Francis, 2009. "A Century of Work and Leisure," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 189-224, July.
  5. Carol Rogers & Kenneth A. Swinnerton, 2002. "A Theory of Exploitative Child Labor," Working Papers gueconwpa~02-02-03, Georgetown University, Department of Economics.
  6. Jorge Soares, 2008. "Borrowing Constraints, Parental Altruism and Welfare," Working Papers 08-12, University of Delaware, Department of Economics.
  7. O'Connell, Stephen A. & Zeldes, Stephen P., 1993. "Dynamic efficiency in the gifts economy," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 363-379, June.
  8. Sylvain Dessy & Stephane Pallage, 2000. "Child Labor and Coordination Failures," Cahiers de recherche CREFE / CREFE Working Papers 109, CREFE, Université du Québec à Montréal.
  9. Bernheim, B Douglas, 1989. "Intergenerational Altruism, Dynastic Equilibria and Social Welfare," Review of Economic Studies, Wiley Blackwell, vol. 56(1), pages 119-28, January.
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  11. Matthias Doepke & Fabrizio Zilibotti, 2005. "The macroeconomics of child labor regulation," Staff Report 354, Federal Reserve Bank of Minneapolis.
  12. Fernandez, Raquel & Rogerson, Richard, 1995. "On the Political Economy of Education Subsidies," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 249-62, April.
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Cited by:
  1. Eugenia Fotoniata & Thomas Moutos, 2011. "Product Quality, Informality, and Child Labour," CESifo Working Paper Series 3537, CESifo Group Munich.
  2. Alice Fabre & Stéphane Pallage, 2013. "Child Labor, Idiosyncratic Shocks, and Social Policy," Working Papers halshs-00913666, HAL.
  3. Heather Congdon Fors, 2012. "Child Labour: A Review Of Recent Theory And Evidence With Policy Implications," Journal of Economic Surveys, Wiley Blackwell, vol. 26(4), pages 570-593, 09.

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