Child Labor Standards in Regional Trade Agreements : Theory and Evidence

This paper studies the impact of child labor standards in regional trade agreements on avariety of child labor market outcomes, including employment, education, and household inequality. It developsa stylized general equilibrium model of child labor in an economy open to international trade and considers the impactof regional trade agreements with and without child labor bans. The paper empirically investigates the effects ofthese clauses in trade agreements in a broad international panel of 101 developing countries, using harmonized surveymicrodata. Exploiting quasi-experimental methods to obtain plausibly causal estimates, the analysis finds that regionaltrade agreements without child-labor bans lead to reductions in child employment and increases in school enrollment,particularly for older children aged 14–17 years. Child labor bans in regional trade agreements perversely increaseemployment of children aged 14–17 years and decrease schoolenrollment for both young and older children. These effects appear to decrease inter-household income inequality throughincreased child earnings. The findings are consistent with the theoretical predictions from the model and theliterature on child labor bans.