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Fiscal Policy, Expectation Traps, And Child Labor

  • PATRICK M. EMERSON
  • SHAWN D. KNABB

"This paper develops a dynamic model with overlapping generations where there are two possible equilibria: one without child labor, and one with it. It is shown that intergenerational transfers can eliminate the child labor equilibrium and that this intervention is Pareto improving. However, if society does not believe that the government will implement the transfer program, it won't, reinforcing society's expectations. This is true even if the transfer program would have been implemented in the absence of uncertainty. Thus a government may be powerless to prevent the child labor equilibrium if it does not command the confidence of their populace, leaving the country in an expectations trap." ("JEL" D91, E60, J20, O20) Copyright 2006 Western Economic Association International.

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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 45 (2007)
Issue (Month): 3 (07)
Pages: 453-469

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Handle: RePEc:bla:ecinqu:v:45:y:2007:i:3:p:453-469
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  1. Glomm, Gerhard, 1997. "Parental choice of human capital investment," Journal of Development Economics, Elsevier, vol. 53(1), pages 99-114, June.
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  12. Patrick M. Emerson & Andre Portela Souza, 2002. "Is There a Child Labor Trap? Inter-Generational Persistence of Child Labor in Brazil," Vanderbilt University Department of Economics Working Papers 0214, Vanderbilt University Department of Economics.
  13. Bell, Clive & Gersbach, Hans, 2009. "Child Labor And The Education Of A Society," Macroeconomic Dynamics, Cambridge University Press, vol. 13(02), pages 220-249, April.
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  16. Sylvain Dessy & Désiré Vencatachellum, 2002. "Explaining Cross-Country Differences in Policy Response to Child Labour," Cahiers de recherche 02-03, HEC Montréal, Institut d'économie appliquée.
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