IDEAS home Printed from https://ideas.repec.org/a/aif/journl/v4y2020i8p127-145.html
   My bibliography  Save this article

Impact of Trade Openness and Foreign Direct Investment on Child Labor; Evidence from Sub-Saharan African Countries

Author

Listed:
  • Wani Nelson Waru

Abstract

The purpose of this paper is to examine the impact of Trade Openness and Foreign Direct Investment on Child Labor; Evidence from Sub-Saharan Africa countries using a panel data from 1990 to 2017 for 32 countries. Using Generalized Methods of Moments (GMM) as the main estimating technique with robustness checks using two-stage least squares (2SLS) regression analysis to address the endogeneity that could cause the direction of the bias to be either positive or negative. This paper seeks to examine the underlying link between FDI, Trade Openness and child labor, which suggest essential implications for eradicating child labor’s policies for Sub-Saharan African Countries. This study found that trade openness is positively and significantly related to child labor. The possible explanation is that trade openness raises the output of the exportable sector and upsurges the demand for child labor as well as the child-wage. The openness of market amalgamation argues that globalization may increase the wages paid to increase the earnings opportunities of children in poor economies, thereby increasing child labor. As far as FDI is a concern, Foreign investors seem to be less interested in exploiting unskilled labor than is presumed by the conventional wisdom due to the fact that market size and market growth, political stability, and infrastructure are often as important, if not more important than low wages. The results fail to find that countries with low labor standards in general and a high incidence of child labor attract a greater inflow of Foreign Direct Investment. The study provides several implications for the policymaker on Trade openness and FDI on child labor and end by suggesting that rich countries should restrict the sale of goods from developing countries that lack or do not enforce child labor laws, effective policy against child labor is to promote the development of functioning credit markets in Sub-Saharan African countries and to facilitate access to these markets for poorer households

Suggested Citation

  • Wani Nelson Waru, 2020. "Impact of Trade Openness and Foreign Direct Investment on Child Labor; Evidence from Sub-Saharan African Countries," International Journal of Science and Business, IJSAB International, vol. 4(8), pages 127-145.
  • Handle: RePEc:aif:journl:v:4:y:2020:i:8:p:127-145
    as

    Download full text from publisher

    File URL: https://ijsab.com/wp-content/uploads/584.pdf
    Download Restriction: no

    File URL: https://ijsab.com/volume-4-issue-8/3419
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Antoine Bommier & Pierre Dubois, 2004. "Rotten Parents and Child Labor," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 240-248, February.
    2. Chen, Joyce J., 2013. "Identifying non-cooperative behavior among spouses: Child outcomes in migrant-sending households," Journal of Development Economics, Elsevier, vol. 100(1), pages 1-18.
    3. Davies, Ronald B. & Voy, Annie, 2009. "The effect of FDI on child labor," Journal of Development Economics, Elsevier, vol. 88(1), pages 59-66, January.
    4. Edmonds, Eric V. & Pavcnik, Nina, 2006. "International trade and child labor: Cross-country evidence," Journal of International Economics, Elsevier, vol. 68(1), pages 115-140, January.
    5. Zhao, Liqui & Wang, Fei & Zhao, Zhong, 2016. "Trade liberalisation and child labour in China," MERIT Working Papers 2016-054, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    6. Edmonds, Eric V. & Pavcnik, Nina, 2006. "Trade liberalization and the allocation of labor between households and markets in a poor country," Journal of International Economics, Elsevier, vol. 69(2), pages 272-295, July.
    7. Adams, Samuel & Opoku, Eric Evans Osei, 2015. "Foreign direct investment, regulations and growth in sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 48-56.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edmonds, Eric V., 2008. "Child Labor," Handbook of Development Economics, in: T. Paul Schultz & John A. Strauss (ed.), Handbook of Development Economics, edition 1, volume 4, chapter 57, pages 3607-3709, Elsevier.
    2. Edmonds, Eric V. & Pavcnik, Nina, 2006. "International trade and child labor: Cross-country evidence," Journal of International Economics, Elsevier, vol. 68(1), pages 115-140, January.
    3. Doytch, Nadia & Thelen, Nina & Mendoza, Ronald U., 2014. "The impact of FDI on child labor: Insights from an empirical analysis of sectoral FDI data and case studies," Children and Youth Services Review, Elsevier, vol. 47(P2), pages 157-167.
    4. Tang, Can & Zhao, Liqiu & Zhao, Zhong, 2018. "Child labor in China," China Economic Review, Elsevier, vol. 51(C), pages 149-166.
    5. Zhao, Liqui & Wang, Fei & Zhao, Zhong, 2016. "Trade liberalisation and child labour in China," MERIT Working Papers 2016-054, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    6. Ebeke, Christian Hubert, 2012. "The power of remittances on the international prevalence of child labor," Structural Change and Economic Dynamics, Elsevier, vol. 23(4), pages 452-462.
    7. Christian Hubert Ebeke, 2010. "The Effect of Remittances on Child Labor: Cross-Country Evidence," Economics Bulletin, AccessEcon, vol. 30(1), pages 351-364.
    8. Aïssata COULIBALY, 2016. "Revisiting the Relationship between Financial Development and Child Labor in Developing Countries: Do Inequality and Institutions Matter?," Working Papers 201619, CERDI.
    9. Luis Carvalho & Aurora A.C. Teixeira, 2011. "Where are the poor in International Economics?," FEP Working Papers 425, Universidade do Porto, Faculdade de Economia do Porto.
    10. Heather Congdon Fors, 2012. "Child Labour: A Review Of Recent Theory And Evidence With Policy Implications," Journal of Economic Surveys, Wiley Blackwell, vol. 26(4), pages 570-593, September.
    11. repec:ilo:ilowps:469448 is not listed on IDEAS
    12. repec:ebl:ecbull:v:30:y:2010:i:1:p:351-364 is not listed on IDEAS
    13. Heather Congdon Fors, 2014. "Social Globalization and Child Labor: A Cross-country Analysis," The Developing Economies, Institute of Developing Economies, vol. 52(2), pages 125-153, June.
    14. Dagdemir, Ozcan & Acaroglu, Hakan, 2010. "The effects of globalization on child labor in developing countries," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 2(2), pages 1-12, July.
    15. Kechagia, Polyxeni & Metaxas, Theodore, 2020. "FDI, child labor and gender issues in Sub – Saharan Africa: an empirical approach," MPRA Paper 104311, University Library of Munich, Germany.
    16. Heather Congdon Fors, 2017. "Globalization and school enrollment in a panel of countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(3), pages 295-315, April.
    17. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    18. Donado, Alejandro. & Wälde, Klaus., 2012. "Globalization, trade unions and labour standards in the North," ILO Working Papers 994694483402676, International Labour Organization.
    19. Lucia Rizzica, 2018. "When the Cat’s Away The Effects of Spousal Migration on Investments on Children," World Bank Economic Review, World Bank Group, vol. 32(1), pages 85-108.
    20. Vivek H. Dehejia & Yiagadeesen Samy, 2007. "Trade and Labor Standards: A Review of the Theory and New Empirical Evidence," Carleton Economic Papers 07-12, Carleton University, Department of Economics.
    21. Chanyoung Lee & Peter F. Orazem, 2010. "Lifetime health consequences of child labor in Brazil," Research in Labor Economics, in: Randall K.Q. Akee & Eric V. Edmonds & Konstantinos Tatsiramos (ed.), Child Labor and the Transition between School and Work, volume 31, pages 99-133, Emerald Publishing Ltd.
    22. Ambler, Kate, 2015. "Don't tell on me: Experimental evidence of asymmetric information in transnational households," Journal of Development Economics, Elsevier, vol. 113(C), pages 52-69.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aif:journl:v:4:y:2020:i:8:p:127-145. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Farjana Rahman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.