Combating Child Labor: Incentives and Information Disclosure in Global Supply Chains

Manufacturing & Service Operations Management (2015)

42 Pages Posted: 21 Jan 2015 Last revised: 1 Jun 2018

See all articles by Soo-Haeng Cho

Soo-Haeng Cho

Carnegie Mellon University - Tepper School of Business

Xin Fang

Singapore Management University - Lee Kong Chian School of Business

Sridhar R. Tayur

Carnegie Mellon University - David A. Tepper School of Business

Ying Xu

Singapore University of Technology and Design (SUTD); Carnegie Mellon University - Tepper School of Business

Date Written: May 19, 2018

Abstract

Nearly 200 million children are engaged in child labor, many in developing countries that are part of the supply base of global manufacturing networks. This paper models a multinational firm in a developed country selling the product made by a supplier in a developing country. The firm can influence its supplier's use of child labor through its pricing and inspection. We find that the firm's pricing and inspection strategies work as strategic substitutes in combating child labor, so reducing the cost of inspections alone does not necessarily help to reduce child labor. When information about the firm's inspection policy is disclosed, the firm's inspection strategy can become more effective, but it may inadvertently induce more child labor unless the firm adopts a zero-tolerance policy against child labor. This problem persists even when the firm uses a deferred payment that is contingent on no child labor being found during inspections.

Keywords: Game Theory, Global Operations Management, Supply Chain Management

Suggested Citation

Cho, Soo-Haeng and Fang, Xin and Tayur, Sridhar R. and Xu, Ying, Combating Child Labor: Incentives and Information Disclosure in Global Supply Chains (May 19, 2018). Manufacturing & Service Operations Management (2015). Available at SSRN: https://ssrn.com/abstract=2552268 or http://dx.doi.org/10.2139/ssrn.2552268

Soo-Haeng Cho (Contact Author)

Carnegie Mellon University - Tepper School of Business ( email )

Pittsburgh, PA 15213-3890
United States

Xin Fang

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Sridhar R. Tayur

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

Ying Xu

Singapore University of Technology and Design (SUTD) ( email )

20 Dover Drive
Singapore, 138682
Singapore

Carnegie Mellon University - Tepper School of Business ( email )

Pittsburgh, PA 15213-3890
United States

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