Subhayu Bandyopadhyay (Department of Economics, West Virginia University) Sudeshna C. Bandyopadhyay (Department of Economics, West Virginia University)
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This paper augments the existing literature on trade and child labor by exploring the effects of terms of trade changes in the context of a three good general equilibrium model, where one of the goods is a non-traded good. We find that under quasi-linear preferences the effect of the terms of trade on child labor depends critically on the pattern of substitutability (or complementarity) in the excess demand functions between the export good and the non-traded good. We extend the analysis to the case of homothetic preferences and find that the basic result is somewhat modified in a context where the marginal utility of income is affected by the terms of trade. We also extend the analysis to the case where factors move freely between the three goods as in a Heckscher-Ohlin type framework. Finally, we show that a balanced budget policy of taxing the education of skilled families and subsidizing the education of unskilled families must reduce child labor without any impact on aggregate welfare.
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Paper provided by Department of Economics, West Virginia University in its series Working Papers with number
05-03.
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Find related papers by JEL classification: F1 - International Economics - - Trade O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
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