Advertisement

Journal of Economics

, Volume 125, Issue 1, pp 69–95 | Cite as

Low level equilibrium trap, unemployment, efficiency of education system, child labour and human capital formation

  • Kamalika Chakraborty
  • Bidisha Chakraborty
Article

Abstract

This paper builds an overlapping generations household economy model to examine the impact of adult unemployment on the human capital formation of a child and on child labour, as viewed through the lens of the adult’s expectations of future employability. The model indicates that the higher the adult unemployment rate in the skilled sector, the lesser is the time allocated by an unskilled adult towards schooling of her child. We also find that an increase in the unskilled adult’s wage may or may not decrease child labour in the presence of unemployment. The model predicts that an increase in child wage increases schooling and human capital growth rate only if the adults in the unskilled sector earn less than subsistence consumption expenditure. As the responsiveness of skilled wage to human capital increases, schooling and human capital growth rates increase. The model dynamics bring out the importance of education efficiency and parental human capital in human capital formation of the child. In the case of an inefficient education system, generations will be trapped into low level equilibrium. Only in the presence of an efficient education system, steady growth of human capital is possible. Suitable policies that may be framed to escape the child labour trap are discussed as well.

Keywords

Adult unemployment Skilled and unskilled sector Child labour Human capital Schooling Education Low level equilibrium trap 

JEL Classifications

E24 J21 J22 J24 O15 

Notes

Acknowledgements

We are thankful to anonymous referees for their invaluable comments.

References

  1. Abe K, Ogawa H (2017) Globalization, child labour and adult unemployment. The Ritsumeikan Econ Rev 65(4):193–205Google Scholar
  2. Acemoglu D, Pischke JS (2000) Changes in the wage structure, family income, and children’s education. NBER working paper number 7986Google Scholar
  3. Ahn N, Ugidos A (1996) The effects of the labor market situation of parents on children: inheritance of unemployment. Investig Econ 20(1):23–41Google Scholar
  4. Augeraud-Veron E, Fabre A (2004) Education, poverty and child labour. http://repec.org/esFEAM04/up.9133.1080753714.pdf. Accessed 21 June 2017
  5. Azariadis C (1996) The economy of poverty traps: part one: complete market. J Econ Growth 1:449–486CrossRefGoogle Scholar
  6. Baland J, Robinson J (2000) Is child labor inefficient? J Polit Econ 108:663–679CrossRefGoogle Scholar
  7. Basu K (1999) Child labor: causes, consequence and cure with remarks on international labor standards. J Econ Lit 37(3):1083–1119CrossRefGoogle Scholar
  8. Basu K (2000) The intriguing relation between adult minimum wage and child labour. Econ J 110(462):50–61CrossRefGoogle Scholar
  9. Basu K, Van PH (1998) The economics of child labor. Am Econ Rev 88(3):412–427Google Scholar
  10. Becker GS, Tomes N (1979) An equilibrium theory of the distribution of income and intergenerational mobility. J Polit Econ 87(6):1153–1189CrossRefGoogle Scholar
  11. Bell C, Gersbach H (2001) Child labor and the education of a society. IZA discussion paper number 338Google Scholar
  12. Bhalotra S (2003) Child labour in Asia and Africa. Background research paper for the EFA monitoring reportGoogle Scholar
  13. Bonnet M (1993) Child labour in Africa. Int Labour Rev 132(3):371–389Google Scholar
  14. Brown E, Kaufold H (1988) Human capital accumulation and the optimal level of unemployment insurance provision. J Labor Econ 6(4):493–514CrossRefGoogle Scholar
  15. Chakraborty B, Chakraborty K (2014) Child Labour, human capital formation size of landholding: short run and long run analysis. Econ Bull 34(3):2024–2037Google Scholar
  16. Contreras S (2008) Child labor participation, human capital accumulation, and economic development. J Macroecon 30:499–512CrossRefGoogle Scholar
  17. Davis DR, Reeve TA (1997) Human capital, unemployment and relative wages in a global economy. NBER working paper number 6133Google Scholar
  18. Das C, Ghosh A (2006) Child labor and minimum wage law. Contemp Issues Ideas Soc Sci 2(3)Google Scholar
  19. Dellas H (1997) Unemployment insurance benefits and human capital accumulation. Eur Econ Rev 41:517–524CrossRefGoogle Scholar
  20. Edmonds E, Pavcnik N (2005) Child labour in the global economy. J Econ Perspect 18(1):199–220CrossRefGoogle Scholar
  21. Emerson PM, Souza AP (2003) Is there a child labor trap? Intergenerational persistence of child labor in Brazil. Econ Dev Cult Change 51(2):375–398CrossRefGoogle Scholar
  22. Emerson PM, Knabb SD (2006) Opportunity, inequality and the intergenerational transmission of child labour. Econ New Ser 73(291):413–434CrossRefGoogle Scholar
  23. Emerson PM, Knabb SD (2007) Fiscal policy, expectation traps and child labor. Econ Inq 45(3):453–469CrossRefGoogle Scholar
  24. Estevez K (2011) Nutritional efficiency wages and child labour. Econ Model 28(4):1793–1801CrossRefGoogle Scholar
  25. Fabre A, Pallage S (2011) Child labor, idiosyncratic shocks, and social policy. CIRPEE working paper number 11-15Google Scholar
  26. Fan CS (2004) Relative wage, child labor and human capital. Oxf Econ Pap 56:687–700CrossRefGoogle Scholar
  27. Fei J, Ranis G (1963) Innovation, capital accumulation and economic development. Am Econ Rev 53:283–313Google Scholar
  28. Galor O, Tsiddon D (1997) The distribution of human capital and economic growth. J Econ Growth 2:93–124CrossRefGoogle Scholar
  29. Genicot G, Ray D (2010) Aspirations and inequality. NBER working paper number 19976Google Scholar
  30. Glomm G (1997) Parental choice of human capital investment. J Dev Econ 53:99–114CrossRefGoogle Scholar
  31. Glomm G, Ravikumar B (1998) Increasing returns, human capital, and the Kuznets curve. J Dev Econ 55:353–367CrossRefGoogle Scholar
  32. Goldin C (1978) Household and market production of families in a late nineteenth century American city. Industrial Relations Section, Princeton University, Working paper number 115Google Scholar
  33. Gupta MR (2001) Child labour, skill formation and capital accumulation: a theoretical analysis. Keio Econ Stud 38(2):23–40Google Scholar
  34. Gupta MR (2002) Trade sanctions, adult unemployment and the supply of child labour: a theoretical analysis. Dev Policy Rev 20(3):317–332CrossRefGoogle Scholar
  35. Hanchane S, Lioui A, Touahri D (2006) Human capital as a risky asset and the effect of uncertainty on the decision to invest. HALGoogle Scholar
  36. Hare PG, Ulph DT (1979) On education and distribution. J Polit Econ 87(5):S193–S212CrossRefGoogle Scholar
  37. International Programme on the Elimination of Child Labour (IPEC) (2015) World report on child labor 2015: paving the way to decent work for young people, International Labor Organization (ILO)Google Scholar
  38. Islam M, Sivasankaran A (2015) How does child labor respond to changes in adult work opportunities? Evidence from NRFEGA. Harvard University working paperGoogle Scholar
  39. Khan REA (2003) Children in different activities: child schooling and child labour. Pak Dev Rev 42(2):137–160Google Scholar
  40. Lavy V (1996) School supply constraints and children’s educational outcomes in rural Ghana. J Dev Econ 51(2):219–314CrossRefGoogle Scholar
  41. Lewis A (1958) Unlimited labor: further notes. The Manchester School of EconomicsGoogle Scholar
  42. Mauro L, Carmeci G (2003) Long run growth and investment in education: does unemployment matter? J Macroecon 25:123–137CrossRefGoogle Scholar
  43. Moav O (2005) Cheap children and the persistence of poverty. Econ J R Econ Soc 115(500):88–110Google Scholar
  44. Mukherjee D, Das S (2008) Role of parental education in schooling and child labour decision: urban India in the last decade. SOC Indic Res 89:305–322CrossRefGoogle Scholar
  45. Mukherjee D, Sinha UB (2006) Schooling, job prospect and child labour in a developing economy. MIMEO: Indian Statistical Institute, KolkataGoogle Scholar
  46. Oreopoulos P, Page ME, Stevens AH (2003) Does human capital transfer from parent to child? The intergenerational effects of compulsory schooling. NBER working paper number 10164Google Scholar
  47. Paul GS (1996) Unemployment and increasing private returns to human capital. Pub Econ 61:1–20CrossRefGoogle Scholar
  48. Pissarides C (1992) Loss of skill during unemployment and the persistence of employment shocks. Q J Econ 107(4):1371–1392CrossRefGoogle Scholar
  49. Ranis G, Fei J (1961) A theory of economic development. Am Econ Rev 51:533–565Google Scholar
  50. Ravallion M, Wodon Q (2000) Does child labour displace schooling? Evidence on behavioral responses to an enrollment subsidy. Econ J R Econ Soc 110(462):158–175Google Scholar
  51. Ray R (2000) Child labor, schooling, and their interaction with adult labor: empirical evidence for Peru and Pakistan. World Bank Econ Rev 14(2):347–67CrossRefGoogle Scholar
  52. Ray R (2002) The determinants of child labour and child schooling in Ghana. J Afr Econ 11(4):561–590CrossRefGoogle Scholar
  53. Ray R, Chatterjee B (2013) Trade restriction, adult unemployment and the incidence of child labour: a three sector general equilibrium analysis. Artha Vijnana 55(3):239–251CrossRefGoogle Scholar
  54. Robinson JA (1993) Unemployment and human capital formation. MIMEO, University of MelbourneGoogle Scholar
  55. Sarkar J, Sarkar D (2012) Why does child labour persist with declining poverty? NCER working paper number 84Google Scholar
  56. Sasmal J, Guillen J (2015) Poverty, educational failure and the child labour trap: the Indian experience. Glob Bus Rev 16:270–280CrossRefGoogle Scholar
  57. Skoufias E, Parker SW (2002) Labor market shocks and their impacts on work and schooling: evidence from Urban Mexico. FCND discussion paper number 129Google Scholar
  58. Wahba J (2005) The influence of market wages and parental history on child labour and schooling in Egypt. IZA discussion paper number 1771Google Scholar

Copyright information

© Springer-Verlag GmbH Austria, part of Springer Nature 2017

Authors and Affiliations

  1. 1.Jadavpur UniversityKolkataIndia

Personalised recommendations