An Explanation of the International Variation in the Prevalence of Child Labour

Abstract

It is hypothesized that the institutional acceptability of child labor will be more prevalent when the other members of a society gain from its use. Therefore, the cross-country variation in the prevalence of child labor depends on the degree to which child labor affects the welfare of the remaining members of a society. It is demonstrated theoretically that the non-child-labor factors gain from child labor when the economy is closed. As an economy becomes more open to international trade, those gains diminish and even turn negative as the size of the economy increases. Child labor will not exist in capital abundant countries since, in them, child labor makes the non-child-labor factors worse off. It is shown empirically that the cross-country prevalence of child labor falls with increases in a nation's per capita income, its openness to trade, and its economic size. It is argued that trade sanctions, as a remedy for child labor, may be counter-productive since an open economy reduces the benefits of child labor to the other members of a society, and thereby reduces the society's incentive to allow child labor. The model also demonstrates that the economic changes brought on by democracy undermine the practice of child labor. Copyright Blackwell Publishers Ltd 2001.

Geographic Variations in the Early Diffusion of Corporate Voluntary Standards: Comparing ISO 14001 and the Global Compact

“…In a bivariate correlation, Bennie et al (2007) finds that Forbes Global 2000 companies headquartered in full democracies are more likely to join the GC, but this result does not hold in their multivariate analysis. To the authors' knowledge, no studies have previously investigated the influence of polity on the uptake of ISO14001, although previous work generally supports the idea that more democratic countries have a better record on many of the issues addressed by CR standards: superior environmental commitment (Neumayer, 2004) and (possibly) environmental quality (Farzin and Bond, 2005); a lower incidence of child labor (Shelburne, 2001); better core labor standards (Neumayer and de Soysa, 2005); and lower levels of corruption (Bohara, Mitchell, and Mittendorff, 2004).…”

“…Yet quantitative research generally suggests that wealthier economies demonstrate greater policy commitment and/or actual performance with regards to a number of issues underlying ISO14001 and the GC, including: superior environmental commitment and several measures of environmental quality (but not all measures, nor across all income levels) (Dasgupta et al, 2001); a lower incidence of child labor (Shelburne, 2001); better core labor rights (Busse, 2004); and lower levels of corruption (Bohara, Mitchell, and Mittendorff, 2004).…”

Trade Openness, Foreign Direct Investment and Child Labor

“…At the cross-national level, Drenovsky (1992) found that the labor force participation rate of 10 to 14 year old children was not related to the commodity concentration in exports and an index of the presence of multinational corporations in a sample of 70 developed and developing countries in the early 1970s. Using the same dependent variable with reference to the mid-1990s, Shelburne (2001) found the trade ratio, that is the sum of imports and exports normalized by GNP, to be negatively associated with child labor. This holds true both in a sample of all developing countries as well as a more restricted sample excluding the former Communist countries of Eastern Europe and the former Soviet Union, which traditionally have low child labor incidence (or possibly under-reporting of such incidence).…”

“…We improve upon the three main existing empirical cross-national studies on the subject, namely Shelburne (2001), Cigno, Rosati and Guarcello (2002) and Edmonds and Pavcnik (2004), in two important ways: First, unlike these studies that mainly address trade openness, we look also at penetration by foreign direct investment (FDI) defined as the stock of FDI over gross domestic product (GDP). Rather than trade openness alone, FDI is often directly accused of engaging in exploitative activities as such notorious cases involving Nike exemplify (Grote, Basu, and Weinhold 1998).…”

Trade Openness, Foreign Direct Investment and Child Labor

“…This is because the return to skilled labor and to the owners of capital is also influenced by world markets and is less dependent on the domestic supply of unskilled labor, including that of children. In closed economies, on the other hand, skilled labor and the owners of capital unambiguously benefit by preserving the cultural and institutional conditions promoting a large supply of cheap unskilled labor, including that of children (Shelburne 2001). If child labor is officially banned, but continues to exist due to lack of enforcement, then as Aggarwal (1995) has noted violations of labor standards are more common in the nontradeables and less export-oriented sectors.…”