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Exploitation of Child Labor and the Dynamics of Debt Bondage

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  • Arnab K. Basu

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  • Nancy H. Chau

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Abstract

This paper is concerned with the institution of debt bondage and child labor employment in the context of an agrarian economy with overlapping generations. The model explores the principal-agent interaction between landlords and tenants, and identifies a set of reasons why households put children to work in response to the need to service outstanding debts, only to realize that child labor work is " exploited", and households are made strictly worse off in general equilibrium. Debt bondage in one generation is further shown to leave spillover effects, and contribute to the cycle of debt, bonded child labor and poverty across generations. In this context, the effectiveness of trade sanctions as a policy response to bonded child labor is evaluated. Contrary to expectations, a trade ban can set off a sequence of increasing indebtedness among agrarian households that offset the intended (static) disincentives to employ child labor.

Suggested Citation

  • Arnab K. Basu & Nancy H. Chau, 2004. "Exploitation of Child Labor and the Dynamics of Debt Bondage," Journal of Economic Growth, Springer, vol. 9(2), pages 209-238, June.
  • Handle: RePEc:kap:jecgro:v:9:y:2004:i:2:p:209-238
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    References listed on IDEAS

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    Cited by:

    1. Carol Ann Rogers & Kenneth A. Swinnerton, 2008. "A theory of exploitative child labor," Oxford Economic Papers, Oxford University Press, vol. 60(1), pages 20-41, January.
    2. Basu, Arnab K. & Dimova, Ralitza, 2020. "Household Behavioral Preferences and the Child Labor-Education Trade-off: Framed Field Experimental Evidence from Ethiopia," IZA Discussion Papers 13011, Institute of Labor Economics (IZA).
    3. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2009. "The Effects of Multinational Production on Wages and Working Conditions in Developing Countries," World Scientific Book Chapters, in: Globalization And International Trade Policies, chapter 17, pages 623-687, World Scientific Publishing Co. Pte. Ltd..
    4. Chau, Nancy H., 2016. "On sweatshop jobs and decent work," Journal of Development Economics, Elsevier, vol. 121(C), pages 120-134.
    5. Edmonds, Eric V., 2008. "Child Labor," Handbook of Development Economics, in: T. Paul Schultz & John A. Strauss (ed.), Handbook of Development Economics, edition 1, volume 4, chapter 57, pages 3607-3709, Elsevier.
    6. Rauscher, Michael & Willert, Bianca, 2020. "Modern slavery, corruption, and hysteresis," European Journal of Political Economy, Elsevier, vol. 64(C).
    7. Strulik, Holger, 2008. "The Role of Poverty and Community Norms in Child Labor and Schooling Decisions," Proceedings of the German Development Economics Conference, Zurich 2008 42, Verein für Socialpolitik, Research Committee Development Economics.
    8. Holger Strulik, 2013. "School Attendance And Child Labor—A Model Of Collective Behavior," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 246-277, April.
    9. Elias Dinopoulos & Laixun Zhao, 2007. "Child Labor and Globalization," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 553-579.
    10. Lutfullah Lutf & Shahadat I Haq Yasini, 2018. "Factors Contributing to Child Labor in Afghanistan: A Case Study in Jalalabad City," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 348-372, September.
    11. Arnab Basu, 2013. "Impact of rural employment guarantee schemes on seasonal labor markets: optimum compensation and workers’ welfare," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(1), pages 1-34, March.
    12. Chau, Nancy H., 2009. "Sweatshop Equilibrium," IZA Discussion Papers 4363, Institute of Labor Economics (IZA).
    13. Maoyong Fan & Mimi Houston & Anita Alves Pena, 2014. "Determinants of child labor in the modern United States: Evidence from agricultural workers and their children and concerns for ongoing public policy," Economics Bulletin, AccessEcon, vol. 34(1), pages 287-306.
    14. Basu, Arnab K. & Dimova, Ralitza, 2021. "Household Preferences and Child Labor in Rural Ethiopia," IZA Discussion Papers 14062, Institute of Labor Economics (IZA).
    15. Kouki Sugawara, 2011. "The worst forms of child labour: dynamic model and policy implication," Economics Bulletin, AccessEcon, vol. 31(2), pages 1910-1921.
    16. Bose, Pinaki & Compton, Ryan A. & Basu, Arnab K., 2020. "Paying for freedom: Indentured labour and strategic default," Economic Modelling, Elsevier, vol. 89(C), pages 502-511.
    17. Eric Edmonds, 2007. "Institutional Influences on Human Capital Accumulation: Micro Evidence from Children Vulnerable to Bondage," Working Papers id:1109, eSocialSciences.

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