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Barriers to Capital Accumulation and the Incidence of Child Labor

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  • Marco A Espinosa-Vega
  • Richard C. Barnett

Abstract

The World Bank documents an inverse relationship between GDP per capita and child labor participation rates. We construct a life-cycle model with human and physical capital in which parents make a time allocation choice for their child. The model considers two features that have shown potential in explaining differences in states of development across nations. These are a minimum consumption requirement, and barriers to physical capital accumulation. We find the introduction of capital barriers alone is not enough to replicate the aforementioned observation by the World Bank. However, we find the interplay of a minimum consumption requirement and barriers to capital may enhance our understanding of child labor and the poverty of nations. Additionally, we find support for policies aimed at reducing capital barriers as a means to reduce child labor.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/220.

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Length: 23
Date of creation: 01 Nov 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/220

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Keywords: Poverty; Gross domestic product; child labour; child labor;

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  1. Satyajit Chatterjee & B. Ravikumar & B. Ravikumar, 1997. "Minimum consumptions requirements: theoretical and quantitative implications for growth and distribution," Working Papers 97-15, Federal Reserve Bank of Philadelphia.
  2. Ranjan, P., 1999. ""Credit Constraints and the Phenomenon of Child Labor"," Papers 98-99-12, California Irvine - School of Social Sciences.
  3. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  4. Jafarey, Saqib & Lahiri, Sajal, 2002. "Will trade sanctions reduce child labour?: The role of credit markets," Journal of Development Economics, Elsevier, vol. 68(1), pages 137-156, June.
  5. L. Rachel Ngai, 2003. "Barriers and the Transition to Modern Growth," CEP Discussion Papers dp0561, Centre for Economic Performance, LSE.
  6. Stephen L. Parente & Richard Rogerson & Randall Wright, 2000. "Homework in Development Economics: Household Production and the Wealth of Nations," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 680-687, August.
  7. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
  8. Aiyagari, S. Rao & Greenwood, Jeremy & Seshadri, Ananth, 2002. "Efficient Investment in Children," Journal of Economic Theory, Elsevier, vol. 102(2), pages 290-321, February.
  9. Atkeson, Andrew & Ogaki, Masao, 1996. "Wealth-varying intertemporal elasticities of substitution: Evidence from panel and aggregate data," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 507-534, December.
  10. Diego Restuccia, 2002. "Barriers to Capital Accumulation and Aggregate Total Factor Productivity," Working Papers diegor-02-01, University of Toronto, Department of Economics.
  11. Das Satya P & Deb Rajat, 2006. "A Dynamic Analysis of Child Labor with a Variable Rate of Discount: Some Policy Implications," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-30, August.
  12. Jones, Charles I., 1994. "Economic growth and the relative price of capital," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 359-382, December.
  13. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
  14. Rangazas, Peter, 2000. "Schooling and economic growth: A King-Rebelo experiment with human capital," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 397-416, October.
  15. Jean-Marie Baland & James A. Robinson, 2000. "Is Child Labor Inefficient?," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 663-679, August.
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