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The effect of FDI on child labor

  • Davies, Ronald B.
  • Voy, Annie

This paper examines the effect of FDI on child labor. Using 1995 data for 145 countries, we find that, contrary to common fears, FDI is negatively correlated with child labor. This effect disappears when controlling for per capita income. After doing so, we find no robust effect of either FDI or international trade on child labor. This result is robust to corrections for the endogeneity of FDI, trade, and income. Furthermore, this result is confirmed using data from earlier years. This suggests that the impact of FDI and trade on child labor, if any, is the increases in income they generate.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 88 (2009)
Issue (Month): 1 (January)
Pages: 59-66

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Handle: RePEc:eee:deveco:v:88:y:2009:i:1:p:59-66
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  1. Jeffrey A. Frankel & Andrew K. Rose, 2002. "Is Trade Good or Bad for the Environment? Sorting Out the Causality," NBER Working Papers 9201, National Bureau of Economic Research, Inc.
  2. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  3. Edmonds, Eric V & Pavcnik, Nina, 2004. "International Trade and Child Labour: Cross-Country Evidence," CEPR Discussion Papers 4309, C.E.P.R. Discussion Papers.
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  8. Neumayer, Eric & de Soysa, Indra, 2005. "Trade Openness, Foreign Direct Investment and Child Labor," World Development, Elsevier, vol. 33(1), pages 43-63, January.
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  16. Cigno, Alessandro & Rosati, Furio C. & Guarcello, Lorenzo, 2002. "Does Globalisation Increase Child Labour?," IZA Discussion Papers 470, Institute for the Study of Labor (IZA).
  17. Ronald B. Davies, 2002. "Hunting High and Low for Vertical FDI," University of Oregon Economics Department Working Papers 2002-12, University of Oregon Economics Department, revised 01 Aug 2002.
  18. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
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