How to Deal with Covert Child Labour, and Give Children an Effective Education, in a Poor Developing Country
Department of Economics and Management, University of Florence; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics; Centre for Household, Income, Labour and Demographic Economics (CHILD)
IZA Discussion Paper No. 5663
As credit and insurance markets are imperfect, and given that intra-family transfers, and the way a child uses her time outside school hours, are private information, the second-best policy makes school enrollment compulsory, forces overt child labour below its efficient level (if positive), and uses a combination of need and merit based grants, financed by earmarked taxes, to relax credit constraints, redistribute and insure. Existing conditional cash transfer schemes can be made to approximate the second-best policy by incorporating these principles in some measure.
Number of Pages in PDF File: 20
Keywords: child labour, education, uncertainty, moral hazard, optimal taxation
JEL Classification: D82, H21, H31, I28, J24
Date posted: April 25, 2011