Title
Child Labor and Globalization
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.
Elias DINOPOULOS
Department of Economics, University of Florida
Laixun ZHAO
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501
Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059