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How to Deal with Covert Child Labour, and Give Children an Effective Education, in a Poor Developing Country: An Optimal Taxation Problem with Moral Hazard

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  • Alessandro Cigno

Abstract

Given that credit and insurance markets are imperfect, and given also that intra-household transfers, and much of the work a child does, are private information, the second-best policy uses a combination of need and merit based education awards, together with a mix of taxes on parental income, and on the return to educational investment. It also makes school enrollment compulsory and, if the child wage rate is sufficiently high, sets a ceiling, decreasing in parental income, on overt child labour.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3077.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3077

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Keywords: child labour; education; uncertainty; moral hazard;

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References

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  1. Ranjan, Priya, 2001. "Credit constraints and the phenomenon of child labor," Journal of Development Economics, Elsevier, vol. 64(1), pages 81-102, February.
  2. Dehejia, Rajeev H. & Beegle, Kathleen & Gatti, Roberta, 2003. "Child labor, income shocks, and access to credit," Policy Research Working Paper Series 3075, The World Bank.
  3. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  4. William Pouliot, 2003. "Introducing Uncertainty into Baland and Robinson's Model of Child Labour," Carleton Economic Papers 03-11, Carleton University, Department of Economics, revised Feb 2006.
  5. Fuwa, Nobuhiko & Ito, Seiro & Kubo, Kensuke & Kurosaki, Takashi & Sawada, Yasuyuki, 2009. "How does credit access affect children's time allocation? Evidence from rural India," IDE Discussion Papers 183, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  6. Razin, Assaf, 1976. "Lifetime Uncertainty, Human Capital and Physical Capital," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 439-48, September.
  7. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
  8. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-63, December.
  9. William R. Johnson, 1987. "Income Redistribution as Human Capital Insurance," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 269-280.
  10. Sylvain E. Dessy & St├ęphane Pallage, 2005. "A Theory of the Worst Forms of Child Labour," Economic Journal, Royal Economic Society, vol. 115(500), pages 68-87, 01.
  11. Ravallion, Martin & Wodon, Quentin, 1999. "Does child labor displace schooling? - evidence on behavioral responses to an enrollment subsidy," Policy Research Working Paper Series 2116, The World Bank.
  12. Hanushek, Eric & Charles Ka Yui Leung & Kuzey Yilmaz, 2002. "Redistribution through Education and Other Transfer Mechanisms," Royal Economic Society Annual Conference 2002 94, Royal Economic Society.
  13. Kodde, David A, 1986. "Uncertainty and the Demand for Education," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 460-67, August.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. How to tax covert child labor
    by Economic Logician in Economic Logic on 2010-06-14 14:14:00
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Cited by:
  1. Webbink, Ellen & Smits, Jeroen & de Jong, Eelke, 2012. "Hidden Child Labor: Determinants of Housework and Family Business Work of Children in 16 Developing Countries," World Development, Elsevier, vol. 40(3), pages 631-642.

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