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Exploitation of Child Labor and the Dynamics of Debt Bondage

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Listed author(s):
  • Arnab K. Basu

    ()

  • Nancy H. Chau

    ()

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.

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Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 9 (2004)
Issue (Month): 2 (06)
Pages: 209-238

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Handle: RePEc:kap:jecgro:v:9:y:2004:i:2:p:209-238
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  1. Pranab K. Bardhan, 1983. "Labor-tying in a Poor Agrarian Economy: A Theoretical and Empirical Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 501-514.
  2. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1.
  3. Matthias Doepke, 2004. "Accounting for Fertility Decline During the Transition to Growth," Journal of Economic Growth, Springer, vol. 9(3), pages 347-383, 09.
  4. Arnab K. Basu, 2002. "Oligopsonistic Landlords, Segmented Labor Markets, and the Persistence of Tied-Labor Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 438-453.
  5. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
  6. Moshe Hazan & Binyamin Berdugo, 2002. "Child Labour, Fertility, and Economic Growth," Economic Journal, Royal Economic Society, vol. 112(482), pages 810-828, October.
  7. Arnab K. Basu & Nancy H. Chau, 2003. "Targeting Child Labor in Debt Bondage: Evidence, Theory, and Policy Implications," World Bank Economic Review, World Bank Group, vol. 17(2), pages 255-281, December.
  8. Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
  9. Braverman, Avishay & Stiglitz, Joseph E, 1982. "Sharecropping and the Interlinking of Agrarian Markets," American Economic Review, American Economic Association, vol. 72(4), pages 695-715, September.
  10. Basu, Arnab K. & Chau, Nancy H. & Grote, Ulrike, 2000. "Guaranteed Manufactured Without Child Labor," Working Papers 179542, Cornell University, Department of Applied Economics and Management.
  11. Mukherjee, Anindita & Ray, Debraj, 1995. "Labor tying," Journal of Development Economics, Elsevier, vol. 47(2), pages 207-239, August.
  12. Basu, Kaushik, 1987. "Disneyland monopoly, interlinkage and usurious interest rates," Journal of Public Economics, Elsevier, vol. 34(1), pages 1-17, October.
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