Are Fair Trade Labels Effective Against Child Labour?

23 Pages Posted: 21 May 2008

See all articles by Jean-Marie Baland

Jean-Marie Baland

Facultés Universitaires Notre-Dame de la Paix (FUNDP)

Cédric Duprez

affiliation not provided to SSRN

Date Written: May 2007

Abstract

In this paper, we develop a model of North-South trade to analyze the impact of a label certifying the absence of child labour in the export production of the South. When most eligible producers in the South can obtain the label, its impact is considerably reduced by a displacement effect whereby adult workers replace children in the export sector while children replace adults in the domestic sector. The label is then unable to create a price differential between goods produced under the label and those produced without it. When only a small fraction of eligible producers have access to the label, so that the South exports both labelled and unlabelled production to the North, labelled producers generally gain while those without a label generally loose from the introduction of the label. Ex ante welfare may thus fall in the South if the probability of getting a label when one qualifies is small. The impact on child labour is in general ambiguous, as the reaction of child labour to higher or lower adult and children wages depends on the strength of income and substitution effects.

Keywords: child labour, fair trade, label

JEL Classification: F02, F16, O10, O19

Suggested Citation

Baland, Jean-Marie and Duprez, Cédric, Are Fair Trade Labels Effective Against Child Labour? (May 2007). CEPR Discussion Paper No. DP6259, Available at SSRN: https://ssrn.com/abstract=1135497

Jean-Marie Baland (Contact Author)

Facultés Universitaires Notre-Dame de la Paix (FUNDP) ( email )

8 Rempart de la Vierge
B-5000 Namur
Belgium

Cédric Duprez

affiliation not provided to SSRN

No Address Available

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