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Welfare Impact Of A Ban On Child Labor

  • JORGE SOARES

"This article presents a new rationale for imposing restrictions on child labor. In a standard overlapping generation model where parental altruism results in transfers that children allocate to consumption and education, the Nash-Cournot equilibrium results in suboptimal levels of parental transfers and does not maximize the average level of utility of currently living agents. A ban on child labor decreases children's income and generates an increase in parental transfers bringing their levels closer to the optimum, raising children's welfare as well as average welfare in the short run and in the long run. Moreover, the inability to work allows children to allocate more time to education, and it leads to an increase in human capital. Besides, to increase transfers, parents decrease savings and hence physical capital accumulation. When prices are flexible, these effects diminish the positive welfare impact of the ban on child labor." ("JEL" D91, E21) Copyright (c) 2010 Western Economic Association International.

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

Volume (Year): 48 (2010)
Issue (Month): 4 (October)
Pages: 1048-1064

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Handle: RePEc:bla:ecinqu:v:48:y:2010:i:4:p:1048-1064
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  1. Matthias Doepke & Fabrizio Zilibotti, 2005. "The Macroeconomics of Child Labor Regulation," American Economic Review, American Economic Association, vol. 95(5), pages 1492-1524, December.
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