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Trade and Child Labor: A General Equilibrium Analysis

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  • Bandyopadhyay, Subhayu

    (Federal Reserve Bank of St. Louis)

  • Bandyopadhyay, Sudeshna C.

    (West Virginia University)

Abstract

This paper augments the existing literature on trade and child labor by exploring the effects of terms of trade changes in the context of a three good general equilibrium model, where one of the goods is a non-traded good. We find that under quasi-linear preferences the effect of the terms of trade on child labor depends critically on the pattern of substitutability (or complementarity) in the excess demand functions between the export good and the non-traded good. We extend the analysis to the case of homothetic preferences and find that the basic result is somewhat modified in a context where the marginal utility of income is affected by the terms of trade. We also extend the analysis to the case where factors move freely between the three goods as in a Heckscher-Ohlin type framework. Finally, we show that a balanced budget policy of taxing the education of skilled families and subsidizing the education of unskilled families must reduce child labor without any impact on aggregate welfare.

Suggested Citation

  • Bandyopadhyay, Subhayu & Bandyopadhyay, Sudeshna C., 2005. "Trade and Child Labor: A General Equilibrium Analysis," IZA Discussion Papers 1514, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1514
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    References listed on IDEAS

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    1. Edmonds, Eric V. & Pavcnik, Nina, 2006. "International trade and child labor: Cross-country evidence," Journal of International Economics, Elsevier, vol. 68(1), pages 115-140, January.
    2. Jean-Marie Baland & James A. Robinson, 2000. "Is Child Labor Inefficient?," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 663-679, August.
    3. Edmonds, Eric V. & Pavcnik, Nina, 2005. "The effect of trade liberalization on child labor," Journal of International Economics, Elsevier, vol. 65(2), pages 401-419, March.
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    Cited by:

    1. Biswajit Chatterjee & Runa Ray, 2016. "Impact of Trade vs. Non-trade Policies on the Incidence of Child Labour," Foreign Trade Review, , vol. 51(4), pages 287-297, November.
    2. Harald Grossmann & Jochen Michaelis, 2007. "Trade Sanctions and the Incidence of Child Labor," Review of Development Economics, Wiley Blackwell, vol. 11(1), pages 49-62, February.

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    More about this item

    Keywords

    child labor; non-traded goods; substitutability or complementarity; terms of trade;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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