Poverty alleviation programs, FDI-led growth and child labour under agricultural dualism

The paper is aimed at providing a theoretical explanation why policies that affect only the supply side of the child labour problem may not be able to mitigate the incidence of child labour in a developing economy in terms of a three-sector general equilibrium model with agricultural dualism and child labour. Although a poverty alleviation program like subsidization of backward agriculture exerts a downward pressure on the child labour incidence through the supply side by raising adult wage income it ultimately worsens the problem by increasing the demand for child labour resulting from an expansion of backward agriculture. The paper finds that a policy of overall economic growth in the form of an FDI (foreign direct investment) is indeed able to put downward pressures on the child labour problem both through the demand and supply sides. Welfare of the child labour-supplying families also improves consequently.