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The Effect of FDI on Child Labor

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  • Ronald B. Davies
  • Annie Voy

Abstract

This paper examines the extent to which foreign direct investment (FDI) affects child labor. Using 1995 data for 145 countries, we find that, contrary to common fears, FDI is negatively correlated with child labor. This effect, however, disappears when controlling for per capita income. After doing so, we find no robust effect of either FDI or international trade on child labor. This result is robust to corrections for the endogeneity of FDI, trade, and income. Furthermore, this result is confirmed when using data from earlier years and when using fixed effects. This suggests that the impact of FDI and trade on child labor, if any, is the increases in income they generate.

Suggested Citation

  • Ronald B. Davies & Annie Voy, 2007. "The Effect of FDI on Child Labor," The Institute for International Integration Studies Discussion Paper Series iiisdp215, IIIS.
    • Handle: RePEc:iis:dispap:iiisdp215
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    References listed on IDEAS

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    More about this item

    Keywords

    Child Labor; Foreign Direct Investment; International Trade;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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