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Exploitation of Child Labor and the Dynamics of Debt Bondage

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  • Arnab K. Basu

    ()

  • Nancy H. Chau

    ()

Abstract

This paper is concerned with the institution of debt bondage and child labor employment in the context of an agrarian economy with overlapping generations. The model explores the principal-agent interaction between landlords and tenants, and identifies a set of reasons why households put children to work in response to the need to service outstanding debts, only to realize that child labor work is " exploited", and households are made strictly worse off in general equilibrium. Debt bondage in one generation is further shown to leave spillover effects, and contribute to the cycle of debt, bonded child labor and poverty across generations. In this context, the effectiveness of trade sanctions as a policy response to bonded child labor is evaluated. Contrary to expectations, a trade ban can set off a sequence of increasing indebtedness among agrarian households that offset the intended (static) disincentives to employ child labor.

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 9 (2004)
Issue (Month): 2 (06)
Pages: 209-238

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Handle: RePEc:kap:jecgro:v:9:y:2004:i:2:p:209-238

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Web page: http://www.springerlink.com/link.asp?id=102931

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References

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  1. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  2. Moshe Hazan & Binyamin Berdugo, 2005. "Child Labor, Fertility and Economic Growth," Development and Comp Systems 0507002, EconWPA.
  3. Mukherjee, Anindita & Ray, Debraj, 1995. "Labor tying," Journal of Development Economics, Elsevier, vol. 47(2), pages 207-239, August.
  4. Bardhan, Pranab K, 1983. "Labor-Tying in a Poor Agrarian Economy: A Theoretical and Empirical Analysis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(3), pages 501-14, August.
  5. Arnab K. Basu, 2002. "Oligopsonistic Landlords, Segmented Labor Markets, and the Persistence of Tied-Labor Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(2), pages 438-453.
  6. Braverman, Avishay & Stiglitz, Joseph E, 1982. "Sharecropping and the Interlinking of Agrarian Markets," American Economic Review, American Economic Association, vol. 72(4), pages 695-715, September.
  7. Arnab K. Basu & Nancy H. Chau, 2003. "Targeting Child Labor in Debt Bondage: Evidence, Theory, and Policy Implications," World Bank Economic Review, World Bank Group, World Bank Group, vol. 17(2), pages 255-281, December.
  8. Matthias Doepke, 2001. "Accounting for Fertility Decline During the Transition to Growth," UCLA Economics Working Papers 804, UCLA Department of Economics.
  9. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, January.
  10. Basu, Kaushik, 1987. "Disneyland monopoly, interlinkage and usurious interest rates," Journal of Public Economics, Elsevier, vol. 34(1), pages 1-17, October.
  11. Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
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Cited by:
  1. Strulik, Holger, 2008. "The Role of Poverty and Community Norms in Child Labor and Schooling Decisions," Proceedings of the German Development Economics Conference, Zurich 2008 42, Verein für Socialpolitik, Research Committee Development Economics.
  2. Eric V. Edmonds, 2007. "Child Labor," NBER Working Papers 12926, National Bureau of Economic Research, Inc.
  3. Basu, Arnab K., 2011. "Impact of Rural Employment Guarantee Schemes on Seasonal Labor Markets: Optimum Compensation and Workers' Welfare," IZA Discussion Papers 5701, Institute for the Study of Labor (IZA).
  4. Maoyong Fan & Mimi Houston & Anita Alves Pena, 2014. "Determinants of child labor in the modern United States: Evidence from agricultural workers and their children and concerns for ongoing public policy," Economics Bulletin, AccessEcon, vol. 34(1), pages 287-306.
  5. Chau, Nancy, 2009. "Sweatshop Equilibrium," IZA Discussion Papers 4363, Institute for the Study of Labor (IZA).
  6. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2002. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," Working Papers, Research Seminar in International Economics, University of Michigan 486, Research Seminar in International Economics, University of Michigan.
  7. Carol Rogers & Kenneth A. Swinnerton, 2002. "A Theory of Exploitative Child Labor," Working Papers, Georgetown University, Department of Economics gueconwpa~02-02-03, Georgetown University, Department of Economics.
  8. Kouki Sugawara, 2011. "The worst forms of child labour: dynamic model and policy implication," Economics Bulletin, AccessEcon, vol. 31(2), pages 1910-1921.
  9. Holger Strulik, 2013. "School Attendance And Child Labor—A Model Of Collective Behavior," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 11(2), pages 246-277, 04.
  10. Arnab Basu, 2013. "Impact of rural employment guarantee schemes on seasonal labor markets: optimum compensation and workers’ welfare," Journal of Economic Inequality, Springer, Springer, vol. 11(1), pages 1-34, March.

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