Guaranteed Manufactured Without Child Labor: The Economics of Consumer Boycotts, Social Labeling and Trade Sanctions

26 Pages Posted: 15 Jan 2007

See all articles by Arnab K. Basu

Arnab K. Basu

College of William and Mary - Department of Economics

Nancy H. Chau

Cornell University - School of Applied Economics and Management; IZA Institute of Labor Economics

Ulrike Grote

University of Bonn - Center for Development Research (ZEF); Leibniz Universit├Ąt Hannover - Faculty of Economics and Management

Abstract

Does labeling products "Child-Labor Free" provide a market-based solution to the pervasive employment of child labor? This paper explores the promise of social labeling in the context of its four oft-noted objectives: child labor employment, consumer information, welfare, and trade linkages, when competition between the North and South is based both on comparative cost advantage, and the use of child labor as a hidden product attribute. We show that (i) social labeling benefits consumers and Southern producers, whereas children and Northern producers are worse off; (ii) trade sanctions on unlabeled products deteriorates Southern terms of trade, but leaves the incidence of child labor strictly unaffected; and (iii) a threat to sanction imports of unlabeled Southern products discourages the South from maintaining a credible social labeling program. We also explore the question of whether social labeling should be viewed as a transitory or a permanent institution in developing economies.

Suggested Citation

Basu, Arnab K. and Chau, Nancy H. and Grote, Ulrike, Guaranteed Manufactured Without Child Labor: The Economics of Consumer Boycotts, Social Labeling and Trade Sanctions. Review of Development Economics, Vol. 10, No. 3, pp. 466-491, August 2006. Available at SSRN: https://ssrn.com/abstract=920537 or http://dx.doi.org/10.1111/j.1467-9361.2006.00335.x

Arnab K. Basu (Contact Author)

College of William and Mary - Department of Economics ( email )

Williamsburg, VA 23187-8795
United States
757-221-1318 (Phone)
757-221-1175 (Fax)

HOME PAGE: http://faculty.wm.edu/akbasu/

Nancy H. Chau

Cornell University - School of Applied Economics and Management ( email )

Ithaca, NY 14853
United States
607-255-4463 (Phone)
607-255-9984 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ulrike Grote

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3, D-53113
Bonn
Germany

Leibniz Universit├Ąt Hannover - Faculty of Economics and Management

Koenigsworther Platz 1
Hannover, 30167
Germany

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