The Impact of FDI on Child Labor: Insights from an Empirical Analysis of Sectoral FDI Data and Case Studies

Asian Institute of Management Working Paper No. 13-006

36 Pages Posted: 12 Jul 2013  

Nadia K. Doytch

CUNY - The Graduate Center

Ronald U. Mendoza

Ateneo De Manila University - Ateneo School of Government

Nina Thelen

United Nations Development Programme - Bureau for Development Policy

Date Written: January 2013

Abstract

Not all FDI are alike as far as their impact on various dimensions of human development is concerned. This paper focuses, in particular, on child labor and it undertakes a cross-country empirical analysis of this issue, using data on 100 countries spanning the period 1990-2009. Unlike earlier studies that focus mostly on total FDI, we also utilized data on disaggregated FDI, covering main economic sectors of interest such as agriculture, mining, manufacturing, services, and finance. The empirical results suggest that different economic sectors generate varied effects on child labor. For instance, FDI in agriculture in Europe and Central Asia tends to exacerbate child labor, whereas FDI in manufacturing in South and East Asia and FDI in mining in Latin America appears negatively linked to child labor. Furthermore, signing onto the UN Convention on the Rights of the Child had a positive association with child labor, which runs counter to the intended effect! One possible explanation is that stronger anti-child labor laws could lead to multiple equilibria in labor markets, including the possibility of increasing child labor in certain sectors. Selected case studies help clarify the possible reasons behind this varied FDI impact on child labor, emphasizing among other factors supply chain management and the critical importance of policy implementation and coordination with the private sector.

Keywords: FDI, child labor, income and substitution effect, UN Convention on the Rights of the Child

JEL Classification: E24, F15, O15

Suggested Citation

Doytch, Nadia K. and Mendoza, Ronald U. and Thelen, Nina, The Impact of FDI on Child Labor: Insights from an Empirical Analysis of Sectoral FDI Data and Case Studies (January 2013). Asian Institute of Management Working Paper No. 13-006. Available at SSRN: https://ssrn.com/abstract=2292239 or http://dx.doi.org/10.2139/ssrn.2292239

Nadia K. Doytch

CUNY - The Graduate Center ( email )

365 Fifth Avenue
New York,, NY 10016
United States

Ronald U. Mendoza (Contact Author)

Ateneo De Manila University - Ateneo School of Government ( email )

Katipunan Road
Loyola Heights
Quezon City, 1108
Philippines

Nina Thelen

United Nations Development Programme - Bureau for Development Policy ( email )

United States

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