Calls to prevent imports of product made with child labour often assume that a ban is the best way of reducing the incidence of child labour. But a new paper by Dirk Krueger (U.Penn) and Jessica Donohue (State St Associates) suggests – as has previous research – that a better approach is to expand schooling opportunities. Here’s the abstract:
This article studies the effects of child labor legislation on human capital accumulation and the distribution of wealth and welfare. We calibrate our model to U.S. data circa 1880 and find that the consequences of restricting child labor or providing tax-financed education depend on the main source of individual household income. Households with significant financial assets unambiguously lose from government intervention, whereas high-wage workers benefit most from a child labor ban, and low-wage workers benefit most from free education. Introducing free education results in substantial welfare gains, whereas a child labor ban induces small welfare losses.