Child Labor and Globalization

28 Pages Posted: 11 Dec 2006

See all articles by Elias Dinopoulos

Elias Dinopoulos

Department of Economics; University of Florida - Warrington College of Business Administration - Department of Economics

Lex Zhao

RIEB, Kobe University

Date Written: December 2006

Abstract

The paper embeds child labor in a standard two-sector general-equilibrium model of a small open economy facing perfectly competitive markets, efficiency wages, and free-trade. The modern sector produces a homogeneous good using skilled adult labor and capital, and offers effort-based efficiency wages. The agrarian (traditional) sector produces a homogeneous good using unskilled (child and adult) labor and skilled adult labor, and offers nutritional efficiency wages to child workers. Nutritional efficiency wages introduce wage stickiness and transform the economy into a dual one with unlimited supply of child labor. Trade policies that increase the output of the modern sector reduce the incidence of child labor and the dispersion of wages between adult skilled workers and unskilled workers. Emigration of skilled adult workers reduces the incidence of child labor, whereas emigration of unskilled adult workers has the opposite effect. Domestic subsidies that reduce the child wage increase the incidence of child labor; and a ban on child-labor benefits unskilled adult workers but hurts skilled adult workers.

Keywords: Child-labor, efficiency wages, wage income inequality, globalization, direct foreign investment

JEL Classification: F1, J3

Suggested Citation

Dinopoulos, Elias and Zhao, Laixun, Child Labor and Globalization (December 2006). Available at SSRN: https://ssrn.com/abstract=950586 or http://dx.doi.org/10.2139/ssrn.950586

Elias Dinopoulos (Contact Author)

Department of Economics ( email )

Gainesville, FL 32610-0496
United States

University of Florida - Warrington College of Business Administration - Department of Economics ( email )

224 Matherly Hall
Gainesville, FL 32611-7140
United States
352-392-8150 (Phone)
352-392-7860 (Fax)

Laixun Zhao

RIEB, Kobe University ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501, 657-8501
Japan

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