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The Luxury Axiom, The Wealth Paradox, And Child Labor


  • C. Simon Fan

    () (Department of Economics, Lingnan University)


Basu and Van (1998) present a fundamental framework of child labor with two important axioms: the luxury axiom and the substitution axiom. A number of empirical studies, however, reveal a ¡°wealth paradox¡±. The current paper has two aims. First, it develops a model that provides an explanation for ¡°the wealth paradox¡± in light of the luxury axiom and the substitution axiom. Second, it helps understand the relationship between the luxury axiom and the substitution axiom.

Suggested Citation

  • C. Simon Fan, 2011. "The Luxury Axiom, The Wealth Paradox, And Child Labor," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(3), pages 25-45, September.
  • Handle: RePEc:jed:journl:v:36:y:2011:i:3:p:25-45

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    References listed on IDEAS

    1. Atheendar S. Venkataramani & K.R. Shanmugam & Jennifer Prah Ruger, 2010. "Health, Technical Efficiency, And Agricultural Production In Indian Districts," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(4), pages 1-23, December.
    2. Kaushik Basu, 1999. "Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1083-1119, September.
    3. Kambhampati, Uma S. & Rajan, Raji, 2006. "Economic growth: A panacea for child labor?," World Development, Elsevier, vol. 34(3), pages 426-445, March.
    4. Basu, Kaushik & Das, Sanghamitra & Dutta, Bhaskar, 2010. "Child labor and household wealth: Theory and empirical evidence of an inverted-U," Journal of Development Economics, Elsevier, vol. 91(1), pages 8-14, January.
    5. Ranjan, Priya, 2001. "Credit constraints and the phenomenon of child labor," Journal of Development Economics, Elsevier, vol. 64(1), pages 81-102, February.
    6. Kruger, Diana I., 2007. "Coffee production effects on child labor and schooling in rural Brazil," Journal of Development Economics, Elsevier, vol. 82(2), pages 448-463, March.
    7. Matthias Doepke & Fabrizio Zilibotti, 2005. "The Macroeconomics of Child Labor Regulation," American Economic Review, American Economic Association, vol. 95(5), pages 1492-1524, December.
    8. Sonia Bhalotra & Christopher Heady, 2003. "Child Farm Labor: The Wealth Paradox," World Bank Economic Review, World Bank Group, vol. 17(2), pages 197-227, December.
    9. Horrell, Sara & Humphries, Jane & Voth, Hans-Joachim, 2001. "Destined for Deprivation: Human Capital Formation and Intergenerational Poverty in Nineteenth-Century England," Explorations in Economic History, Elsevier, vol. 38(3), pages 339-365, July.
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    11. Hunt, E. H., 1986. "Industrialization and Regional Inequality: Wages in Britain, 1760–1914," The Journal of Economic History, Cambridge University Press, vol. 46(04), pages 935-966, December.
    12. Cigno, Alessandro & Rosati, Furio Camillo, 2005. "The Economics of Child Labour," OUP Catalogue, Oxford University Press, number 9780199264452.
    13. Christelle Dumas, 2007. "Why do parents make their children work? A test of the poverty hypothesis in rural areas of Burkina Faso," Oxford Economic Papers, Oxford University Press, vol. 59(2), pages 301-329, April.
    14. Cheolsung Park, 2010. "Children¡¯S Health Gradient In Developing Countries: Evidence From Indonesia," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(4), pages 25-44, December.
    15. Talia Bar & Kaushik Basu, 2009. "Children, Education, Labor, and Land: In The Long Run and Short Run," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 487-497, 04-05.
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    Cited by:

    1. Julián Arteaga Vallejo, 2016. "Land, Child Labor, and Schooling: Longitudinal evidence from Colombia and Mexico," DOCUMENTOS CEDE 014977, UNIVERSIDAD DE LOS ANDES-CEDE.
    2. Isaac Koomson & Simplice A. Asongu, 2016. "Relative Contribution of Child Labour to Household Farm and Non-Farm Income in Ghana: Simulation with Child's Education," African Development Review, African Development Bank, vol. 28(1), pages 104-115, March.
    3. Lima, Luiz Renato & Mesquita, Shirley & Wanamaker, Marianne, 2015. "Child labor and the wealth paradox: The role of altruistic parents," Economics Letters, Elsevier, vol. 130(C), pages 80-82.
    4. Volkert, Jürgen & Strotmann, Harald & Moczadlo, Regina, 2014. "Sustainable Human Development: Corporate challenges and potentials. The case of Bayer CropScience's cotton seed production in rural Karnataka (India)," UFZ Discussion Papers 5/2014, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).

    More about this item


    Child Labor; Luxury Axiom; Wealth Paradox; Substitution Axiom;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply


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