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Abstinence from Child Labor and Profit Seeking

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Author Info
Ronald B. Davies () (University of Oregon Economics Department)

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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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File URL: http://economics.uoregon.edu/papers/UO-2000-1_Davies_Child_Labor.pdf
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Publisher 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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Postal: 1285 University of Oregon, 435 PLC, Eugene, OR 97403-1285
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Related research
Keywords: Child labor product differentiation

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Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Chiu, W Henry, 1998. "Income Inequality, Human Capital Accumulation and Economic Performance," Economic Journal, Royal Economic Society, vol. 108(446), pages 44-59, January. [Downloadable!] (restricted)
  2. Ranjan, Priya, 2001. "Credit constraints and the phenomenon of child labor," Journal of Development Economics, Elsevier, vol. 64(1), pages 81-102, February. [Downloadable!] (restricted)
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  3. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 35-52, January. [Downloadable!] (restricted)
  4. Rogers Carol Ann & Swinnerton Kenneth A, 2005. "A Theory of Exploitative Child Labor," Labor and Demography 0510006, EconWPA. [Downloadable!]
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  5. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
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  6. Kaushik Basu, 1999. "Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1083-1119, September. [Downloadable!] (restricted)
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  7. Degryse, Hans, 1996. "On the Interaction between Vertical and Horizontal Product Differentiation: An Application to Banking," Journal of Industrial Economics, Blackwell Publishing, vol. 44(2), pages 169-86, June. [Downloadable!] (restricted)
  8. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January. [Downloadable!] (restricted)
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  9. 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. [Downloadable!] (restricted)
  10. Helmut Bester, 1998. "Quality Uncertainty Mitigates Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 828-844, Winter. [Downloadable!] (restricted)
  11. Lutz, Stefan & Lyon, Thomas P & Maxwell, John W, 1998. "Strategic Quality Choice with Minimum Quality Standards," CEPR Discussion Papers 1793, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Maskus, Keith E., 1997. "Should core labor standards be imposed through international trade policy?," Policy Research Working Paper Series 1817, The World Bank. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Drusilla Brown, 2006. "Consumer Product Labels, Child Labor and Educational Attainment," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1372-1372. [Downloadable!] (restricted)
  2. Jean Marie Baland, . "Are Fair Trade Labels Effective Against Child Labor?," Working Papers id:1559, esocialsciences.com. [Downloadable!]
  3. Baland, Jean-Marie & Duprez, Cédric, 2007. "Are Fair Trade Labels Effective Against Child Labour?," CEPR Discussion Papers 6259, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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