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Consumer boycott, household heterogeneity, and child labor

Abstract

Consumer boycott campaigns against goods that are produced using child labor are becoming increasingly popular. Yet there is still no consensus on which are the effects of such type of activism on child labor in developing countries. In fact, if some agreement is to be found in the recent economic literature, it is that the boycott does not reduce child labor. We contribute to this discussion presenting a simple model which shows that there are conditions under which a consumer boycott reduces child labor. We consider a small country two-factor economy populated by heterogeneous households. The boycott affects both the adult and the child labor markets. We show that the effects are heterogeneous and depend on household characteristics and on the income distribution. We derive the conditions under which the consumer boycott reduces child labor not only for nonpoor households but also for some of the households whose’ income is—before the boycott—under the subsistence level.

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Notes

  1. Schanberg S.H. (1996) “On the playgrounds of America, Every Kid’s Goal is to Score: In Pakistan, Where children stitch soccer balls for Six Cents an hour, the goals is to Survive.”, Life Magazine, pp. 38–48.

  2. For an account of the story and effects of the boycott, see Naseem (2009).

  3. Interestingly, there is no empirical evidence that globalization per se increases child labor. In fact, the prevailing view in the literature is that globalization has no effect or it may even reduce child labor (Cigno et al. 2002; Cigno 2003; Neumayer and DeSoysa 2005). Yet Cigno et al. (2002) suggest that globalization may increase child labor in very poor countries just because the skill structure of these economies makes them unable to gain from the opportunities provided by increasing trade integration.

  4. Political economy models of child labor laws are Dessy and Knowles (2008) and Doepke and Zilibotti (2005, 2010).

  5. See for instance Jafarey and Lahiri (2002), Gupta (2002), and Grossmann and Michaelis (2007).

  6. Hilowitz (1997) describes the characteristics and effects of social labeling programs in developing countries.

  7. Barros et al. (1994) find that child labor in Brazil is higher in high-income cities with thriving labor markets than in cities with higher poverty rates. Duryea and Arends-Kuenning (2003) show that an increase in the labor market opportunities has a significant positive effect on child labor in Brazil. Wahba (2006) finds that in Egypt child wages are negatively correlated with child labor. Finally, Kruger (2007) documents an increase in child labor and a decline in schooling in coffee-growing regions of Brazil during a temporary boom in coffee exports.

  8. Dessy (2000) and Doepke (2004) introduce heterogeneity through differences in human capital at the household level, but they only consider a bimodal distribution. Krueger and Donohue (2005) models heterogeneity in a dynamic model through an uninsurable labor income shock. The relation between income distribution and child labor is considered in Swinnerton and Rogers (1999) where the role of the capital ownership is studied in a luxury-axiom context. Dessy and Vencatachellum (2003) find a positive relation of child labor incidence and the log of the Gini index of inequality. Swinnerton and Rogers (1999) show that the impact of economy-wide inequality on child labor is, in general, ambiguous.

  9. For instance, these differences may be due to different endowments of human capital as in Benabou (1996).

  10. In our analysis, we exclude both the case in which the household’s interest diverges from the child’s best interest and the case in which the household is not as well informed as the foreign consumers about the child’s best interest. Note that, in both these cases, the consumer boycott is always beneficial to the child.

  11. Note that these consumers do not belong to \(\mathcal{I}\), and thus their preferences are not described by Eq. 1.

  12. See the Appendix B in Supplementary material for a Proof.

  13. In Section 3.3, we discuss how the results of the model change when we relax these assumptions.

  14. The ad hoc MATLAB code used for solving the model is available upon request from the authors.

  15. Note that in developing countries the labor income share is often smaller than the capital income share. Empirical evidence also shows that the capital income share in developing countries is larger than in developed ones (Gollin 2002).

  16. When β = 1, the production side of our model becomes identical to the one in Basu and Zarghamee (2009). In this case, as in their model, the boycott has no effect on adult wages and thus the mechanism we emphasized in our analysis simply disappears.

  17. We thank an anonymous referee for pointing us to the importance of discussing this alternative scenario.

  18. The first inequality is strict if c > 0, the second is strict if α is smaller than the threshold α T.

  19. Note that given w C the effort of the child is a linear function of the mother’s wage \(w_b^A\).

  20. The right-wing movement of the right tail is larger than the left-wing movement of the left tail of the distribution.

  21. We thank a referee for suggesting us to explore this aspect of the model.

  22. Note that in Doepke and Zilibotti (2010) employers and poor families are against a legislation banning child labor. Unskilled workers (who are the only type of workers competing with child labor) having their own children going to school are the only group in favor of it.

  23. In the other cases, the results are straightforward. Since the boycott reduces child wage and increases mother wage, extremely poor households (whom children would always work anyway) are always against the boycott while very rich households (whom children would never work anyway) are always in favor of the boycott.

  24. Interestingly, our results are in accordance with the empirical evidence presented in Chakrabarty and Grote (2009) on the effect of social labeling in the carpet industry in India and Nepal. They found that the labeling status of the households leads to a decrease in child labor. However, the statistical significance of the labeling coefficient is different in the below and above-subsistence regressions: while in the latter it is significant, in the former it is not.

  25. These are the most numerous campaigns because, especially in developing countries, MNCs are more easily monitored by activists than small or micro domestic firms.

  26. Dynamic models studying the effect of measures against child labor are, among others, Jafarey and Lahiri (2002) and Krueger and Donohue (2005).

  27. For an analysis of this aspect, see Basu et al. (2006).

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Acknowledgements

We would like to thank two anonymous referees; the editor of this Journal, Carmen Camacho; and Matthias Doepke, Eric Edmonds, and Vincenzo Lombardo for comments and suggestions. All errors are of course our own responsibility.

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Correspondence to Giorgio Fabbri.

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Responsible editor: Alessandro Cigno

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Di Maio, M., Fabbri, G. Consumer boycott, household heterogeneity, and child labor. J Popul Econ 26, 1609–1630 (2013). https://doi.org/10.1007/s00148-012-0419-7

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Keywords

  • Consumer product boycott
  • Child labor
  • Household heterogeneity
  • Income distribution

JEL Classification

  • J13
  • C35