Rotten Parents and Child Labor
We show that taking into account the consequences of child labor on both childhood welfare and human capital investment, instead of focusing exclusively on the human capital dimension, brings new insights on the economic analysis of child labor. In particular, there are new sources of potential inefficiencies that appear when we assume that labor induces some disutility. In such a case, household decisions regarding child labor may indeed be inefficient even if household members are altruistic, transfers are not at a corner and there are no market imperfections. Also, the presence of child labor disutility leads to an equilibrium where the conditions for an exogenous reduction of child labor to be Pareto improving are less likely to be fulfilled. This paper stresses therefore the fact that economic analysis should not forget one of the most important aspects of child labor, namely that it does not make children happy.
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