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Abstinence from Child Labor and Profit Seeking

  • Ronald B. Davies


    (University of Oregon Economics Department)

Some firms voluntarily abstain from using child labor, presumably in response to concerns about the welfare of overseas child workers. These firms do not, however, support banning the imports of competitors’ products manufactured with child labor. As an explanation of this seemingly contradictory behavior, I consider a setting in which two firms engage in Bertrand competition for consumers who vary in the value they place on goods made without child labor. When the firms differentiate themselves according to their labor input, both enjoy greater profits. If imports using child labor are banned, this reduces the profits of both firms. Similar results can also arise in a many firm setting. If charitable donations to education foundations raise the cost of child labor, this too can arise as a purely profitseeking activity by adult labor firms. Thus, while the adult-labor firms engage in seemingly altruistic behavior, they may do so not out of regard for children but rather for their own profits.

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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2000-1.

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Length: 27
Date of creation: 01 Jul 2000
Date of revision: 01 Aug 2002
Handle: RePEc:ore:uoecwp:2000-1
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  1. Basu, Kaushik, 1998. "Child labor : cause, consequence, and cure, with remarks on International Labor Standards," Policy Research Working Paper Series 2027, The World Bank.
  2. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
  3. Kimberly Ann Elliott & Richard B. Freeman, 2003. "Can Labor Standards Improve under Globalization?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 338.
  4. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
  5. Ranjan, P., 1999. ""Credit Constraints and the Phenomenon of Child Labor"," Papers 98-99-12, California Irvine - School of Social Sciences.
  6. repec:oup:restud:v:60:y:1993:i:1:p:35-52 is not listed on IDEAS
  7. Rogers Carol Ann & Swinnerton Kenneth A, 2005. "A Theory of Exploitative Child Labor," Labor and Demography 0510006, EconWPA.
  8. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  9. Helmut Bester, 1998. "Quality Uncertainty Mitigates Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 828-844, Winter.
  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. Maskus, Keith E., 1997. "Should core labor standards be imposed through international trade policy?," Policy Research Working Paper Series 1817, The World Bank.
  12. Lutz, Stefan & Lyon, Thomas P & Maxwell, John W, 1998. "Strategic Quality Choice with Minimum Quality Standards," CEPR Discussion Papers 1793, C.E.P.R. Discussion Papers.
  13. Degryse, H.A., 1996. "On the interaction between vertical and horizontal product differentiation : An application to banking," Other publications TiSEM 384e9355-ea79-4b3e-90cb-1, Tilburg University, School of Economics and Management.
  14. Chiu, W Henry, 1998. "Income Inequality, Human Capital Accumulation and Economic Performance," Economic Journal, Royal Economic Society, vol. 108(446), pages 44-59, January.
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