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Foreign Capital Inflow, Fiscal Policies And Incidence Of Child Labour In A Developing Economy




Empirical evidence suggests that the incidence of child labour taken as a whole has declined in the developing countries with economic growth due to foreign capital. But, in some high-growth-prone areas, the problem has been on the rise. A pertinent question is why liberalized investment policies have produced dissimilar results in different cases. The present paper is intended to provide an answer to the above question using a three-sector general equilibrium framework with two informal sectors and a non-traded final commodity. The paper is also designed to investigate the efficacy of an education subsidy policy and a lump-sum tax on the richer people in controlling the problem of child labour. We find that the effects of different policies on child labour crucially hinge on the relative intensities in which child labour and adult labour are used in the two informal sectors. However, we find that on the whole a policy of subsidy on education is more effective in comparison with the policy of economic growth with foreign capital in eradicating the prevalence of the evil in the system. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd and The University of Manchester.

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  • Sarbajit Chaudhuri & Jayanta Kumar Dwibedi, 2007. "Foreign Capital Inflow, Fiscal Policies And Incidence Of Child Labour In A Developing Economy," Manchester School, University of Manchester, vol. 75(1), pages 17-46, January.
  • Handle: RePEc:bla:manchs:v:75:y:2007:i:1:p:17-46

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    References listed on IDEAS

    1. Ray, R., 1999. "Poverty, Household Size and Child Welfare in India," Papers 1999-01, Tasmania - Department of Economics.
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    Cited by:

    1. Chatterjee, Tonmoy & Gupta, Kausik, 2013. "Mobility of Capital and Health Sector:A Trade Theoretic Analysis," MPRA Paper 48557, University Library of Munich, Germany.
    2. Dwibedi, Jayanta & Chaudhuri, Sarbajit, 2009. "Agricultural Dualism, Incidence of Child Labour and Subsidy Policies," MPRA Paper 18002, University Library of Munich, Germany.
    3. Somasree Poddar & Sarbajit Chaudhuri, 2016. "Economic Reforms and Gender-Based Wage Inequality in the Presence of Factor Market Distortions," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 301-321, December.
    4. Nigar Hashimzade & Uma Kambhampati, 2010. "Growth and Inverted U in Child Labour: A Dual Economy Approach," Economics & Management Discussion Papers em-dp2009-07, Henley Business School, Reading University.
    5. Chatterjee, Tonmoy, 2012. "Child Labour and Economic Growth: A General Equilibrium Analysis," MPRA Paper 42477, University Library of Munich, Germany.
    6. Burhan, Nik Ahmad Sufian & Sidek, Abdul Halim & Ibrahim, Saifuzzaman, 2016. "Eradicating the Crime of Child Labour in Africa: The Roles of Income, Schooling, Fertility, and Foreign Direct Investment," MPRA Paper 77250, University Library of Munich, Germany.
    7. Dwibedi, Jayanta Kumar & Marjit, Sugata, 2015. "Relative Affluence and Child Labor - Explaining a Paradox," MPRA Paper 66379, University Library of Munich, Germany, revised 31 Aug 2015.
    8. Dwibedi, Jayanta & Chaudhuri, Sarbajit, 2007. "Globalization, consumerism and child labour," MPRA Paper 4370, University Library of Munich, Germany.
    9. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 2014. "International factor mobility, informal interest rate and capital market imperfection: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 37(C), pages 184-192.
    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. Dwibedi, Jayanta Kumar & Chaudhuri, Sarbajit, 2014. "Agricultural subsidy policies fail to deal with child labour under agricultural dualism: What could be the alternative policies?," Research in Economics, Elsevier, vol. 68(3), pages 277-291.
    12. Dwibedi, Jayanta & Chaudhuri, Sarbajit, 2011. "Poverty alleviation programs, FDI-led growth and child labour under agricultural dualism," MPRA Paper 29997, University Library of Munich, Germany.
    13. Chaudhuri, Sarbajit, 2011. "Labor market reform and incidence of child labor in a developing economy," Economic Modelling, Elsevier, vol. 28(4), pages 1923-1930, July.
    14. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 2013. "Endogenous Capital Market Imperfection, Informal Interest Rate Determination and International Factor mobility in a General Equilibrium Model," MPRA Paper 51157, University Library of Munich, Germany.
    15. Chaudhuri, Sarbajit, 2010. "Economic recession, demand constraint and labour markets in a developing economy," MPRA Paper 27433, University Library of Munich, Germany.
    16. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
    17. Dwibedi, Jayanta & Chaudhuri, Sarbajit, 2010. "Child labour in the presence of agricultural dualism: possible cures," MPRA Paper 23487, University Library of Munich, Germany.

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