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Friday 18 Aug 2017 | 20:50 | SYDNEY
Friday 18 Aug 2017 | 20:50 | SYDNEY

Reader riposte: Child labour



9 December 2008 16:04

Kien Choong writes in reply to my post (my response to Kien follows):

In macroeconomics, we learn that the relevant analytical model depends on whether we have in mind the short term, medium term or long term. The analytical framework and policy decisions depend on what the time frame is. Perhaps the debate about child labour is an instance where trade economists and labour economists have different perspectives and policy prescriptions because they have different time frames in mind. 

From a long term perspective, a country (and indeed, the world) would be better off if it invests in the education of its children, where investments in human capital should yield the greatest return. Like all long term investments, this entails short term costs, including the cost of giving families in poverty the financial support they need to send their children to school. Where the capacity to provide such financial support is absent (eg. because the country does not have an effective tax transfer system), the next best policy is arguably to reduce the incentives for children to work. 

Even if trade economists continue to oppose limits to child labour, they must surely acknowledge that it is a bad policy outcome for a country to have even a small percentage of its children working in factories.  The use of child labour can only be justified if there are strong expectations that this is at most a temporary evil to 'kick start' a national economy so that the next generation of children can go to school.

You will find little disagreement with Kien’s point that the policy objective should be to have children in schools, not factories (or worse). The free trader’s response might then run something like: 'The best way to get rid of child labour is to reduce poverty, since there is evidence that, as household incomes increase, parents respond by sending their children to school: on one estimate, differences in living standards explain three-quarters of the variation in the incidence of child labour across countries. Since a good way to boost incomes is to boost international trade, policy measures that might tend to depress trade, even if they are well-intentioned, should be avoided since they are unlikely to address the root cause of the problem (poverty) and may well exacerbate it.' 

For a nice summary of some of these kinds of arguments, see this short essay by Eric Edmonds and Nina Pavcnik, which also cites some of their empirical work. 

This is not to say that there nothing more to be done than wait for the end of poverty. There is still room for national legislation (such as compulsory education) and perhaps for some forms of international standards to play a positive role in reducing child labour – provided, however, that we are very careful to ensure such measures do not result in some of the serious unintended consequences that external interventions have produced in the past.

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