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Are Fair Trade Labels Effective Against Child Labour?

  • Baland, Jean-Marie
  • Duprez, Cédric

In this paper, we develop a model of North-South trade to analyze the impact of a label certifying the absence of child labour in the export production of the South. When most eligible producers in the South can obtain the label, its impact is considerably reduced by a displacement effect whereby adult workers replace children in the export sector while children replace adults in the domestic sector. The label is then unable to create a price differential between goods produced under the label and those produced without it. When only a small fraction of eligible producers have access to the label, so that the South exports both labelled and unlabelled production to the North, labelled producers generally gain while those without a label generally loose from the introduction of the label. Ex ante welfare may thus fall in the South if the probability of getting a label when one qualifies is small. The impact on child labour is in general ambiguous, as the reaction of child labour to higher or lower adult and children wages depends on the strength of income and substitution effects.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6259.

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Date of creation: May 2007
Date of revision:
Handle: RePEc:cpr:ceprdp:6259
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  1. Arnab K. Basu & Nancy H. Chau & Ulrike Grote, 2006. "Guaranteed Manufactured without Child Labor: The Economics of Consumer Boycotts, Social Labeling and Trade Sanctions," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 466-491, 08.
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  3. Ranjan, P., 1999. ""Credit Constraints and the Phenomenon of Child Labor"," Papers 98-99-12, California Irvine - School of Social Sciences.
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  13. Sonia Bhalotra, and Zafiris Tzannatos, 2003. "Child labor : what have we learnt?," Social Protection Discussion Papers 27872, The World Bank.
  14. Basu, Kaushik, 2003. "Policy Dilemmas for Controlling Child Labor," Working Papers 03-11, Cornell University, Center for Analytic Economics.
  15. Dessy, Sylvain E., 2000. "A defense of compulsive measures against child labor," Journal of Development Economics, Elsevier, vol. 62(1), pages 261-275, June.
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  17. Canagarajah, Sudharshan & Coulombe, Harold, 1997. "Child labor and schooling in Ghana," Policy Research Working Paper Series 1844, The World Bank.
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