The Determinants of Child Labor: The Role of Primary Product Specialization

Abstract

The paper tests predictions of a traditional intra-household bargaining model which, under reasonable assumptions, shows that lack of bargaining power in the value chain significantly reduces the capacity of obtaining benefits from increased product demand arising from trade liberalization and therefore is positively associated with child labor. Cross-sectional and panel negative binomial estimates in a sample of emerging countries support this hypothesis showing that proxies of the labor force bargaining power in the international division of labor (such as the share of primary product exports) are significantly related to child labor, net of the effect of traditional controls such as parental income, the quality of education, international aid and trade liberalization. The positive impact of the share of primary product exports on child labor outlines a potential paradox. The paradox suggests that trade liberalisation has not always straightforward positive effects on social indicators and that its short run effects on income distribution and distribution of skills and market power across countries need to be carefully evaluated.

Keywords: child labor, distribution and growth, trade liberalisation

JEL Classification: D1, F1, F4