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Child Labor and Globalization

  • Elias Dinopoulos

    (Department of Economics, University of Florida, USA)

  • Laixun Zhao

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

The paper embeds child labor in a standard two-sector general-equilibrium model of a small open economy facing perfectly competitive markets, efficiency wages, and free-trade. The modern sector produces a homogeneous good using skilled adult labor and capital, and offers effort-based efficiency wages. The agrarian (traditional) sector produces a homogeneous good using unskilled (child and adult) labor and skilled adult labor, and offers nutritional efficiency wages to child workers. Nutritional efficiency wages introduce wage stickiness and transform the economy into a dual one with unlimited supply of child labor. Trade policies that increase the output of the modern sector reduce the incidence of child labor and the dispersion of wages between adult skilled workers and unskilled workers. Emigration of skilled adult workers reduces the incidence of child labor, whereas emigration of unskilled adult workers has the opposite effect. Domestic subsidies that reduce the child wage increase the incidence of child labor; and a ban on child-labor benefits unskilled adult workers but hurts skilled adult workers.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp198.pdf
File Function: First version, 2006
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Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 198.

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Length: 28 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:kob:dpaper:198
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  1. Sebastian Braun, 2006. "Core Labour Standards and FDI: Friends or Foes? The Case of Child Labour," SFB 649 Discussion Papers SFB649DP2006-014, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. Jafarey, Saqib & Lahiri, Sajal, 2002. "Will trade sanctions reduce child labour?: The role of credit markets," Journal of Development Economics, Elsevier, vol. 68(1), pages 137-156, June.
  3. Edward E. Leamer, 1999. "Effort, Wages, and the International Division of Labor," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1127-1162, December.
  4. Strauss, J. & Thomas, D., 1995. "Health, Nutrition and Economic development," Papers 95-23, RAND - Labor and Population Program.
  5. Dasgupta, Partha & Ray, Debraj, 1986. "Inequality as a Determinant of Malnutrition and Unemployment: Theory," Economic Journal, Royal Economic Society, vol. 96(384), pages 1011-34, December.
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  8. Busse, Matthias & Braun, Sebastian, 2003. "Export Structure, FDI and Child Labour," HWWA Discussion Papers 216, Hamburg Institute of International Economics (HWWA).
  9. Parsons, Donald O & Goldin, Claudia, 1989. "Parental Altruism and Self-Interest: Child Labor among Late Nineteenth-Century American Families," Economic Inquiry, Western Economic Association International, vol. 27(4), pages 637-59, October.
  10. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
  11. 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, 06.
  12. Basu, Kaushik, 1992. "The broth and the cooks: A theory of surplus labor," World Development, Elsevier, vol. 20(1), pages 109-117, January.
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  16. Rodgers, G B, 1975. "Nutritionally Based Wage Determination in the Low-Income Labour Market," Oxford Economic Papers, Oxford University Press, vol. 27(1), pages 61-81, March.
  17. Gupta, Manash Ranjan, 2000. "Wage Determination of a Child Worker: A Theoretical Analysis," Review of Development Economics, Wiley Blackwell, vol. 4(2), pages 219-28, June.
  18. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
  19. Copeland, Brian R., 1989. "Efficiency wages in a Ricardian model of international trade," Journal of International Economics, Elsevier, vol. 27(3-4), pages 221-244, November.
  20. Garance Genicot, 2005. "Malnutrition and Child Labor," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 83-102, 03.
  21. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
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