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A Dynamic Analysis of Child Labor with a Variable Rate of Discount: Some Policy Implications

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Author Info

  • Das Satya P

    ()
    (Indian Statistical Institute, Delhi)

  • Deb Rajat

    ()
    (Southern Methodist University)

Abstract

This paper analyzes the problem of child labor in an infinite-horizon dynamic model with a variable rate of time preference and credit constraints. The variability in the rate of time preference leads to the possibility of multiple steady states and a poverty trap. The paper considers the long-run and short-run effects of an array of policies like enrollment subsidy, improvement in primary education infrastructure, lump-sum subsidy, and variations in loan market parameters. We distinguish between policies that reduce child labor in the long run only in the presence of a variable discount rate and other policies which work whether or not the discount rate is variable. Credit-related policies belong to the former group. Policies that reduce child labor and increase family consumption in the long run may have an adverse effect of lowering consumption in the short run.

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File URL: http://www.degruyter.com/view/j/bejeap.2005.5.issue-1/bejeap.2006.5.1.1562/bejeap.2006.5.1.1562.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 5 (2006)
Issue (Month): 1 (August)
Pages: 1-30

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Handle: RePEc:bpj:bejeap:v:contributions.5:y:2006:i:1:n:25

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Cited by:
  1. Richard C. Barnett & Marco A. Espinosa-Vega, 2011. "Barriers to Capital Accumulation and the Incidence of Child Labor," DEGIT Conference Papers c016_014, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Edmonds, Eric V., 2007. "Child Labor," IZA Discussion Papers 2606, Institute for the Study of Labor (IZA).

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