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Child Labor and Globalization

Author

Listed:
  • Elias Dinopoulos

    (Department of Economics, University of Florida, USA)

  • Laixun Zhao

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

Abstract

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.

Suggested Citation

  • Elias Dinopoulos & Laixun Zhao, 2006. "Child Labor and Globalization," Discussion Paper Series 198, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:198
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp198.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Child-labor; Efficiency wages; Wage income inequality; Globalization; Direct foreign investment;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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