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Abstinence from Child Labor and Profit Seeking

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  • Ronald B. Davies

    ()
    (University of Oregon Economics Department)

Abstract

Some firms voluntarily abstain from using child labor, presumably in response to concerns about the welfare of overseas child workers. These firms do not, however, support banning the imports of competitors’ products manufactured with child labor. As an explanation of this seemingly contradictory behavior, I consider a setting in which two firms engage in Bertrand competition for consumers who vary in the value they place on goods made without child labor. When the firms differentiate themselves according to their labor input, both enjoy greater profits. If imports using child labor are banned, this reduces the profits of both firms. Similar results can also arise in a many firm setting. If charitable donations to education foundations raise the cost of child labor, this too can arise as a purely profitseeking activity by adult labor firms. Thus, while the adult-labor firms engage in seemingly altruistic behavior, they may do so not out of regard for children but rather for their own profits.

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Bibliographic Info

Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2000-1.

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Length: 27
Date of creation: 01 Jul 2000
Date of revision: 01 Aug 2002
Handle: RePEc:ore:uoecwp:2000-1

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Keywords: Child labor; product differentiation;

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References

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  1. Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Cowles Foundation Discussion Papers 937, Cowles Foundation for Research in Economics, Yale University.
  2. Chiu, W Henry, 1998. "Income Inequality, Human Capital Accumulation and Economic Performance," Economic Journal, Royal Economic Society, vol. 108(446), pages 44-59, January.
  3. Rogers Carol Ann & Swinnerton Kenneth A, 2005. "A Theory of Exploitative Child Labor," Labor and Demography 0510006, EconWPA.
  4. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  5. Kimberly Ann Elliott & Richard B. Freeman, 2003. "Can Labor Standards Improve under Globalization?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 338.
  6. Basu, Kaushik, 1998. "Child labor : cause, consequence, and cure, with remarks on International Labor Standards," Policy Research Working Paper Series 2027, The World Bank.
  7. Ranjan, P., 1999. ""Credit Constraints and the Phenomenon of Child Labor"," Papers 98-99-12, California Irvine - School of Social Sciences.
  8. Helmut Bester, 1998. "Quality Uncertainty Mitigates Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 828-844, Winter.
  9. Maskus, Keith E., 1997. "Should core labor standards be imposed through international trade policy?," Policy Research Working Paper Series 1817, The World Bank.
  10. Degryse, Hans, 1996. "On the Interaction between Vertical and Horizontal Product Differentiation: An Application to Banking," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 169-86, June.
  11. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
  12. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
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Cited by:
  1. Edmonds, Eric V., 2007. "Child Labor," IZA Discussion Papers 2606, Institute for the Study of Labor (IZA).
  2. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 2013(02), pages 221-259, June.
  3. Fanelli, Domenico, 2010. "The Role of Socially Concerned Consumers in the Coexistence of Ethical and Standard Firms," MPRA Paper 20117, University Library of Munich, Germany.
  4. Baland, Jean-Marie & Duprez, Cédric, 2009. "Are labels effective against child labor?," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1125-1130, December.
  5. Matthias Doepke & Fabrizio Zilibotti, 2009. "Do International Labor Standards Contribute to the Persistence of the Child Labor Problem?," NBER Working Papers 15050, National Bureau of Economic Research, Inc.
  6. Fanelli, Domenico, 2008. "A Two-Stage Duopoly Game with Ethical Labeling and Price Competition when Consumers differ in Preferences," MPRA Paper 11544, University Library of Munich, Germany.
  7. Baland, Jean-Marie & Duprez, Cédric, 2007. "Are Fair Trade Labels Effective Against Child Labour?," CEPR Discussion Papers 6259, C.E.P.R. Discussion Papers.
  8. Basu, Kaushik & Zarghamee, Homa, 2009. "Is product boycott a good idea for controlling child labor? A theoretical investigation," Journal of Development Economics, Elsevier, vol. 88(2), pages 217-220, March.
  9. Kaushik Basu & Homa Zarghamee, 2008. "Product boycott a good idea for controlling child labor? A theoretical investigation," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-09, Indian Statistical Institute, New Delhi, India.
  10. Liu, Zugang (Leo) & Anderson, Trisha D. & Cruz, Jose M., 2012. "Consumer environmental awareness and competition in two-stage supply chains," European Journal of Operational Research, Elsevier, vol. 218(3), pages 602-613.
  11. D'Alessandro, Simone & Fanelli, Domenico, 2009. "The Role of Income Distribution in the Diffusion of Corporate Social Responsibility," MPRA Paper 18659, University Library of Munich, Germany.

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