Child Labor and the International Policy Debate - The Education/Child Labor Trade-Off and the Consequences of Trade Sanctions

This paper provides an overview of the current academic and public debate on child labor. There is growing impetus to impose international minimum labor standards banning child labor. However, this paper argues that while partial bans such as trade restrictions, voluntary codes of conduct and labeling schemes may improve the working conditions of a small percentage of child laborers in developing countries, this approach might ultimately do more harm than good. Total or partial bans on child labor have the potential to lower household welfare under realistic assumptions, as will be shown in a simple model. We argue that the underlying economic determinants of child labor supply must be addressed directly, taking into account the interrelationship between the market for schooling and that for child labor. The paper emphasizes that, with limited resources available for combating child labor, it is important to carefully judge which policies will have the greatest impact. However, as our model has also shown, under certain circumstances, major causes for the emergence and existence of child labor may be credit market imperfections and the high costs of education, so that resources should be allocated accordingly.