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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Macroeconomics, Volume 30, Issue 1, March 2008, Pages 499–512
This paper presents a household theoretical model that explains child labor as a function of household resources, wages, and child work time allocation. The analysis is based on the interplay between household educational investment choices and adult–child wage differentials. The theory dynamics reveal that child labor participation is increasing in wage equality and as the wage gap decreases it reduces the distance by where the households is able to escape the cycle of poverty by investing beyond the dynamically attracting poverty level of inefficient human capital investment. The model dynamics also present the conditions by where poor households use child labor as a development strategy, as a means of accumulating physical assets at the expense of child human capital investment, in the early stages of development. The policy implications of this work are that child labor bans increase the wage differentials between child and adult earners while simultaneously decreasing the household incentive to invest in child education. The impact, of such policies, has a double negative effect on poor households. Furthermore, policies that reduce wage distortions, between adult and child labor, increase adult human capital, and provide universal access to educational will have long-run developmental growth effects. These policies, in the long-run, are shown to produce household substitution away from child labor and toward the acquisition of schooling based education.
Child labor has played itself out in the political, public, and academic, forum with a mixed set of policies and remedies. The problem that economists face in addressing the topic of child labor lies on how one interprets the expected welfare utility experience of individual households if child labor is, or is not, eliminated. According to Fan, 2004 and Basu and Van, 1998 an increase in child labor policy restrictions leads to a positive, negative, welfare effect depending on the structure of the assumed labor market. That is, the imposition of a ban on child labor will shift the supply curve of labor to the left, this, in turn, leads to an increase in the wage rate for adults; yet, the increase in wages raises, lowers, household utility depending on which effect dominates the change, substitution or income effect. The income effect would dominate a substitution effect in the case where child labor is not substituted from one industry to another.1 In this case, the rise in the adult wage caused by a reduction in the labor supplied will have a positive income effect that could potentially compensate the household for the loss income from its young not being able to participate in the labor market. On the other hand, if child labor is only displaced from one sector and reallocated in another, say from export to domestic production, the substitution of one labor group for another will have zero to negative net effects on household welfare. That is, the child labor entering the domestic production market will displace adult labor lowering overall wages for all participants of the domestic production market. The wages in the primary, export production, market may have overall zero net impact on adult wages due to the influx of adults entering the export production market because of higher wages relative to those earned in the domestic production market. If the substitution of one labor sector to another dominates the income effect, that would in tern depress child wages, and possibly expose children to more hazardous work environments, and have a mixed effect on adult wages. On the other side of the economic debate exits a moral and ethical consumer behavior problem, is the consumption of known child labor produced goods acceptable? Basu and Van, 1998, Fan, 2004, Edmonds, 2005 and Edmonds and Pavcnik, 2005, among others, argue that child labor while socially wrong, may serve as an economic good. Under some assumptions, and conditions, they argue that child labor bans could have negative welfare effects. This paper presents a general equilibrium model that addresses the effects of child labor on household outcomes. Of interest is the notion that child labor bans will depress household resources by reducing household income. While work by Baland and Robinson (2000) state that child labor is an equilibrium outcome and that under certain conditions child labor bans may lead to child welfare improving outcomes; this paper, along with Basu and Van (1998), find that child labor bans are not efficient outcomes. The reason for this result lies on the effect that wage distortions have on the incentives of children to participate in the labor market. The dynamics of the model show that child labor participation is a decreasing function of wage inequality between adults and child laborers. The paper sets to uncover the impact of child labor participation as a dynamic approach to household decisions of child educational choices given that a household begins the process of development from a poverty stricken beginning. Hazan and Berdugo (2002) finds that in the early stages of development child labor participation is prevalent. In this paper, Hazan and Berdugo (2002) view is supported under the condition that child labor wages are not distorted. That is, in this paper the use of institutional wage regimes alters household choices and distorts individual incentives creating the conditions by where perpetual poverty traps exist. While, Baland and Robinson (2000) call this a capital market imperfection, this paper treats markets as competitive and efficient. Thus, any wage distortions must come exogenously to both households and good producers. Therefore, wage distortions in this paper come from institutional inefficiencies. Where, wage distortions between adult and child earners are derived in two modes. Weak institutions that prevent the state from properly allocating resources where social players, household choices, have created socially inadequate allocation of resources.2 Secondly, exogenous market distortions in the name of labor bans, on export goods, will force the state to alter the wage structure to dissuade child labor participants from entering this employment sector as a way of complying with the ban.3 The innovative elements of this work lie on institutional effects on household outcomes and household investment decision on human capital development. The evolution of human capital is shown to be independent of household resources which stand in contrast with the prevailing view that household income is a major determinant of child labor participation (Hazan and Berdugo, 2002). This result comes from child labor time allocation that is found to be dependent on parameters and the relative adult–child wage but is not dependent on household resources. Moav (2005) finds that educational investment is independent of physical capital growth. While, this work finds educational investment dependent on household physical capital resources (Moav, 2005) construction of human capital development is strictly increasing and concave in educational investment. Hence, in Moav (2005) work, the evolution of educational investment is synonymous with the evolution of human capital. In this regard, Moav (2005) derived evolution of human capital is consistent with this papers finding that human capital evolves independent of physical capital development. This paper shows that the distortions found in the adult–child wage are indicative of human capital development poverty trap in the short-run. This finding is different from that found in Baland and Robinson, 2000, Hazan and Berdugo, 2002 and Fan, 2004. In the early stages of development the most crucial variable is not liquidity constraints, or household resources, but wage distortions. Furthermore, an important implication, of this work, is found in the effect that adult–child wage differentials have on the threshold distance faced by the household to escape the poverty trap. Dynamically, this paper finds that as adult–child wages converge, in the early stages of development, child labor rises, in the short-run, but in the long-run it is shown that child labor is abandoned. The paper is broken into four sections. The first section introduces the child labor theory. Section 2 builds the human capital accumulation equation, defines the labor market, produces the household budget constraint, and sets up the good market. A standard two-period heterogeneous agent OLG model is employed to extract the dynamical interpretation of the theory. Section 3 presents the major theoretical implications of the model and derives the dynamic evolution of the economy. This section also looks at the household impact from varying parameter assumptions and the implications of these changes to household outcomes. Finally, Section 4 concludes the paper.
نتیجه گیری انگلیسی
This paper built a general equilibrium model that analyzes the implications of child labor participation on household development. The model allowed the household to choose the amount of educational investment resources to furnish their offspring as well as the amount of child labor participation. The theory and dynamics showed that child labor participation is an efficient outcome under regimes that have little to no wage discrimination. A non-wage discriminating regimes was found to have short-run dynamic child labor participation properties. However, in the long-run, these properties were shown to disappear. The implication of this analysis is an argument against labor bans that focus at distorting the adult–child wage. Under wage distorting regimes, the dynamics showed that child labor participation is declining as the distortions increase. Yet, these properties were also shown to have the effect of lowering the household’s incentive to invest in the child’s education. This implies that for a child labor ban policy to have a positive child welfare effect, lower child labor participation and increasing human capital acquisition, then, the policy must have a strong element of child educational investment. But as shown by the poverty dynamics of the model, the educational investment must be higher than the lost income due to the ban. Otherwise, as suggestive by the model, the household’s relative value of holding on to the child decreases. This condition may lead to a worse overall outcome to the child. The implications of this work indicate that institutional markets should be used to correct wage distortions, increase parental human capital, and provide universal access to education. By decreasing the adult–child wage distortion the household is best able to extract the appropriate child value. Increasing parental human capital through adult literacy programs, vocational training, etc. will have positive spillover on child human capital development. Lastly, making universal access to education will lower the overall household expense to educate a child, will create an alternative to labor participation, and it will increase the level of human capital.