Welfare Impact of a Ban on Child Labor
AbstractThis paper presents a new rationale for imposing restrictions on child labor. In a standard overlapping generations model where parental altruism results in transfers that children allocate to consumption and education, the Nash-Cournot equilibrium results in sub-optimal 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.
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Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 08-01.
Length: 39 pages
Date of creation: 2009
Date of revision:
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Web page: http://www.lerner.udel.edu/departments/economics/department-economics/
More information through EDIRC
child labor; altruism; overlapping generations; welfare.;
Other versions of this item:
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-23 (All new papers)
- NEP-DGE-2009-05-23 (Dynamic General Equilibrium)
- NEP-LAB-2009-05-23 (Labour Economics)
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