Child labor, social capital, and economic development

Globally, 152 million children are involved in economic activities. Poverty is the main cause of child labor, and the lack of social norms and inadequate legal systems are contributing factors. In order to understand the cause of child labor and provide appropriate assistance, this paper focuses on the accumulation of human capital and social capital. The first part of the paper shows that, historically, child labor has been highly dependent on the initial endowments of human capital and social capital. We also show that the condition of bifurcation from an identical initial condition depends on the productivity derived from social capital. The second part of the paper examines the effect of development aid in recipient countries, particularly the effect of two types of programs that attempt to eliminate child labor and provide support to strengthen social capital. We show that both programs are effective at making the economy better off. However, large amounts of development aid for the program that strengthens social capital can make the economy of middle‐income countries worse off.