Welfare Impact of a Ban on Child Labor

Jorge Soares ()
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Jorge Soares: Department of Economics,University of Delaware

No 08-01, Working Papers from University of Delaware, Department of Economics

Abstract: This paper presents a new rationale for imposing restrictions on child labor. In a standard overlapping generations model where parental altruism results in transfers that children allocate to consumption and education, the Nash-Cournot equilibrium results in sub-optimal levels of parental transfers and does not maximize the average level of utility of currently living agents. A ban on child labor decreases children's income and generates an increase in parental transfers bringing their levels closer to the optimum, raising children's welfare as well as average welfare in the short-run and in the long-run. Moreover, the inability to work allows children to allocate more time to education, and it leads to an increase in human capital. Besides, to increase transfers, parents decrease savings and, hence, physical capital accumulation. When prices are flexible, these effects diminish the positive welfare impact of the ban on child labor.

Keywords: child labor; altruism; overlapping generations; welfare. (search for similar items in EconPapers)
JEL-codes: D91 E21 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009
New Economics Papers: this item is included in nep-dge and nep-lab
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Related works:
Journal Article: WELFARE IMPACT OF A BAN ON CHILD LABOR (2010)
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