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Exploitation of Child Labor and the Dynamics of Debt Bondage

  • Arnab K. Basu

    ()

  • Nancy H. Chau

    ()

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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102931

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  1. 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.
  2. 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.
  3. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  4. Matthias Doepke, 2001. "Accounting for Fertility Decline During the Transition to Growth," UCLA Economics Working Papers 804, UCLA Department of Economics.
  5. Moshe Hazan & Binyamin Berdugo, 2005. "Child Labor, Fertility and Economic Growth," Development and Comp Systems 0507002, EconWPA.
  6. Basu, Kaushik, 1987. "Disneyland monopoly, interlinkage and usurious interest rates," Journal of Public Economics, Elsevier, vol. 34(1), pages 1-17, October.
  7. 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.
  8. Anindita Mukherjee & Debraj Ray, 1992. "Labor Tying," Boston University - Institute for Economic Development 29, Boston University, Institute for Economic Development.
  9. Gary S. Becker, 1981. "A Treatise on the Family," NBER Books, National Bureau of Economic Research, Inc, number beck81-1, August.
  10. 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.
  11. 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.
  12. Bardhan, Pranab K, 1983. "Labor-Tying in a Poor Agrarian Economy: A Theoretical and Empirical Analysis," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 501-14, August.
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