FDI, child labor and gender issues in Sub – Saharan Africa: an empirical approach

Trade openness, market size and economic conditions are traditional factors that influence the operation of multinational enterprises (MNEs) and the international capital flows. Over the past years, multinational companies consider additional factors when investing their capitals abroad, among which the political, social and financial conditions of the recipient country. In particular, low labor cost is listed among the factors that attract more foreign investors, which in certain cases could be attributed to the fact that MNEs employ unskilled workers, such as minor employees. Therefore, the association of Foreign Direct Investment (FDI) and child labor in developed and developing economies is an important social issue, which attracted limited research interest though. An extended literature review of empirical studies is conducted in order to investigate and discuss findings on the association between FDI inflows and child labor. Additionally, factors that could potentially determine the exploitation of minor employees by MNEs are presented. Therefore, the purpose of the paper is to empirically investigate the interaction between FDI and child labor in developing countries, taking into consideration gender issues. The paper concludes that previous empirical studies reached contrasting results, considering that different empirical models and methodologies were used. It is observed that a positive association between FDI inflows and child labor is observed by certain researchers, while, on the contrary, others conclude that FDI inflows reduce child labor. Moreover, FDI and child labor determinants, such as the sectoral distribution of inflows or the UN Convention on the Rights of the Child respectively, have also been considered by previous researches. The present research contributed to the existing literature since it is the first effort to empirically investigate the association between FDI and child labor in Sub – Saharan countries by gender. Additionally, the study extends to the investigation of the agriculture as a determinant variable of child labor between male and female minor employees. The paper concludes with a number of policies and proposals that will reduce or prevent child labor in the subsidiaries of multinational companies.