Trade and Child Labor: A General Equilibrium Analysis

30 Pages Posted: 8 Mar 2005

See all articles by Subhayu Bandyopadhyay

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Sudeshna Champati Bandyopadhyay

West Virginia University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2005

Abstract

This paper augments the existing literature on trade and child labor by exploring the effects of terms of trade changes in the context of a three good general equilibrium model, where one of the goods is a non-traded good. We find that under quasi-linear preferences the effect of the terms of trade on child labor depends critically on the pattern of substitutability (or complementarity) in the excess demand functions between the export good and the non-traded good. We extend the analysis to the case of homothetic preferences and find that the basic result is somewhat modified in a context where the marginal utility of income is affected by the terms of trade. We also extend the analysis to the case where factors move freely between the three goods as in a Heckscher-Ohlin type framework. Finally, we show that a balanced budget policy of taxing the education of skilled families and subsidizing the education of unskilled families must reduce child labor without any impact on aggregate welfare.

Keywords: child labor, non-traded goods, substitutability or complementarity, terms of trade

JEL Classification: F1, O19

Suggested Citation

Bandyopadhyay, Subhayu and Bandyopadhyay, Sudeshna Champati, Trade and Child Labor: A General Equilibrium Analysis (March 2005). IZA Discussion Paper No. 1514. Available at SSRN: https://ssrn.com/abstract=680622

Subhayu Bandyopadhyay (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

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

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

Sudeshna Champati Bandyopadhyay

West Virginia University ( email )

Morgantown, WV 26506-6025
United States

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