Wage traps as a cause of illiteracy, child labor, and extreme poverty
When labor incomes approach subsistence levels, the labor supply curve slopes outward, because the fight for survival mandates households to look for longer work hours in response to falling wage rates. We explore conditions under which near-subsistence scenarios may imply wage traps, labor market failures that can be the cause of undernourishment, illiteracy, and child labor. After stating general conditions under which wage traps occur, we look at specific production functions typically employed in quantitative analyses of growth and development. We find that standard Cobb-Douglas production functions do not permit wage traps, whereas CES functions do. Beyond that it turns out that when subsistence requirements increase with work hours, and when work effort rises with the wage rate, up to the efficiency-wage threshold, wage traps become more likely. Measures such as bans on child labor, implementation of minimum wage laws, or the establishment of labor unions may quite effectively improve conditions in wage-trapped labor markets.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kenneth A. Swinnerton & Carol Ann Rogers, 1999.
"The Economics of Child Labor: Comment,"
Labor and Demography
- Pierre-Richard Agenor, 2005.
"The Macroeconomics Of Poverty Reduction,"
University of Manchester, vol. 73(4), pages 369-434, 07.
- P R Agénor, 2004. "The Macroeconomics of Poverty Reduction," Centre for Growth and Business Cycle Research Discussion Paper Series 43, Economics, The Univeristy of Manchester.
- Costas Aariadis & John Stachurski, 2004.
Department of Economics - Working Papers Series
913, The University of Melbourne.
- Sharif, Mohammed, 1991. "Poverty and the forward-falling labor supply function: A microeconomic analysis," World Development, Elsevier, vol. 19(8), pages 1075-1093, August.
- Camerer, Colin & Babcock, Linda & Loewenstein, George & Thaler, Richard, 1996.
"Labor Supply of New York City Cab Drivers: One Day At A time,"
960, California Institute of Technology, Division of the Humanities and Social Sciences.
- Camerer, Colin, et al, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 407-41, May.
- Peter Jensen & Helena Skyt Nielsen, 1997.
"Child labour or school attendance? Evidence from Zambia,"
Journal of Population Economics,
Springer, vol. 10(4), pages 407-424.
- Jensen, P. & Nielsen, H.S., 1996. "Child Labour or School Attendance? Evidence from Zambia," Papers 96-14, Centre for Labour Market and Social Research, Danmark-.
- Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
- Kraay, Aart & Raddatz, Claudio, 2007.
"Poverty traps, aid, and growth,"
Journal of Development Economics,
Elsevier, vol. 82(2), pages 315-347, March.
- Pham Hoang Van & Kaushik Basu, 1999. "The Economics of Child Labor: Reply," American Economic Review, American Economic Association, vol. 89(5), pages 1386-1388, December.
- Blunch, Niels-Hugo & Verner, Dorte, 2000.
"Revisiting the link between poverty and child labor - the Ghanaian experience,"
Policy Research Working Paper Series
2488, The World Bank.
- Blunch, Niels-Hugo & Verner, Dorthe, 2001. "Revisiting the Link Between Poverty and Child Labor: The Ghanaian Experience," CLS Working Papers 01-3, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
- Edmonds, Eric V., 2006. "Child labor and schooling responses to anticipated income in South Africa," Journal of Development Economics, Elsevier, vol. 81(2), pages 386-414, December.
- Maryke Dessing, 2008. "The S-shaped labor supply schedule: evidence from industrialized countries," Journal of Economic Studies, Emerald Group Publishing, vol. 35(6), pages 444-485, November.
- Rosenzweig, Mark R, 1980. "Neoclassical Theory and the Optimizing Peasant: An Econometric Analysis of Market Family Labor Supply in a Developing Country," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 31-55, February.
- Barzel, Yoram & McDonald, Richard J, 1973. "Assets, Subsistence, and The Supply Curve of Labor," American Economic Review, American Economic Association, vol. 63(4), pages 621-33, September.
- Dessing, Maryke, 2002. "Labor supply, the family and poverty: the S-shaped labor supply curve," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 433-458, December.
- World Bank, 2007. "Global Monitoring Report 2007 : Millennium Development Goals, Confronting the Challenges of Gender Equality and Fragile States," World Bank Publications, The World Bank, number 6637.
- Pradhan, M.P. & van Soest, A.H.O., 1997. "Household labor supply in urban areas of Bolivia," Other publications TiSEM dba82438-cf2e-4d92-975b-a, Tilburg University, School of Economics and Management.
- Miracle, Marvin P, 1976. " Interpretation of Backward-sloping Labor Supply Curves in Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 24(2), pages 399-406, January.
- Menno Pradhan & Arthur Van Soest, 1997. "Household Labor Supply In Urban Areas Of Bolivia," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 300-310, May.
- repec:ner:tilbur:urn:nbn:nl:ui:12-74119 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:eee:reecon:v:65:y:2011:i:3:p:232-242. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.