Inequality, Productivity, and Child Labor

We extend the “general model” in Basu and Van (1998) to allow for different types of hosueholds, and extend the model in Swinnerton and Rogers (1999) to allow for a more general utility function. Our new findings are (i) while in some contexts, a more equal income distribution can reduce or eliminate child labor, in others, a more equal distribution of income can exacerbate child labor. (ii) In these latter contexts, increases in total factor productivity are particularly effective in reducing child labor. This work takes the literature a step closer towards informing decisions as to the conditions under which a country needs active financial assistance in addressing child labor, and also those under which political or moral suasion are feasible international policy approaches to eliminating child labor in a country.