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Abstinence from child labor and profit seeking

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  • Davies, Ronald B.

Abstract

Some firms voluntarily abstain from using child labor, presumably in response to concerns about the welfare of overseas child workers. These firms do not, however, support banning the imports of competitors’ products manufactured with child labor. As an explanation of this seemingly contradictory behavior, I consider a setting in which two firms engage in Bertrand competition for consumers who vary in the value they place on goods made without child labor. When the firms differentiate themselves according to their labor input, both enjoy greater profits. If imports using child labor are banned, this reduces the profits of both firms. Similar results can also arise in a many firm setting. If charitable donations to education foundations raise the cost of child labor, this too can arise as a purely profitseeking activity by adult labor firms. Thus, while the adult-labor firms engage in seemingly altruistic behavior, they may do so not out of regard for children but rather for their own profits.
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Suggested Citation

  • Davies, Ronald B., 2005. "Abstinence from child labor and profit seeking," Journal of Development Economics, Elsevier, vol. 76(1), pages 251-263, February.
  • Handle: RePEc:eee:deveco:v:76:y:2005:i:1:p:251-263
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    References listed on IDEAS

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    Cited by:

    1. Matthias Doepke & Fabrizio Zilibotti, 2010. "Do international labor standards contribute to the persistence of the child-labor problem?," Journal of Economic Growth, Springer, vol. 15(1), pages 1-31, March.
    2. Edmonds, Eric V., 2008. "Child Labor," Handbook of Development Economics, Elsevier.
    3. Fanelli, Domenico, 2010. "The Role of Socially Concerned Consumers in the Coexistence of Ethical and Standard Firms," MPRA Paper 20117, University Library of Munich, Germany.
    4. Baland, Jean-Marie & Duprez, Cédric, 2007. "Are Fair Trade Labels Effective Against Child Labour?," CEPR Discussion Papers 6259, C.E.P.R. Discussion Papers.
    5. Kaushik Basu & Homa Zarghamee, 2008. "Product boycott a good idea for controlling child labor? A theoretical investigation," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-09, Indian Statistical Institute, New Delhi, India.
    6. Vasileiou, Efi & Georgantzís, Nikolaos, 2015. "An experiment on energy-saving competition with socially responsible consumers: Opening the black box," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 1-10.
    7. Simone D'Alessandro & Domenico Fanelli, 2015. "The Role of Income Distribution in the Diffusion of Corporate Social Responsibility," Metroeconomica, Wiley Blackwell, vol. 66(2), pages 187-212, May.
    8. Etilé, Fabrice & Teyssier, Sabrina, 2013. "Corporate social responsibility and the economics of consumer social responsibility," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 94(02), pages 221-259, June.
    9. Fanelli, Domenico, 2008. "A Two-Stage Duopoly Game with Ethical Labeling and Price Competition when Consumers differ in Preferences," MPRA Paper 11544, University Library of Munich, Germany.
    10. Liu, Zugang (Leo) & Anderson, Trisha D. & Cruz, Jose M., 2012. "Consumer environmental awareness and competition in two-stage supply chains," European Journal of Operational Research, Elsevier, vol. 218(3), pages 602-613.
    11. Basu, Kaushik & Zarghamee, Homa, 2009. "Is product boycott a good idea for controlling child labor? A theoretical investigation," Journal of Development Economics, Elsevier, vol. 88(2), pages 217-220, March.
    12. Baland, Jean-Marie & Duprez, Cédric, 2009. "Are labels effective against child labor?," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1125-1130, December.

    More about this item

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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