Abstract
This paper is concerned with the institution of debt bondage and child labor employment in the context of an agrarian economy with overlapping generations. The model explores the principal-agent interaction between landlords and tenants, and identifies a set of reasons why households put children to work in response to the need to service outstanding debts, only to realize that child labor work is “ exploited”, and households are made strictly worse off in general equilibrium. Debt bondage in one generation is further shown to leave spillover effects, and contribute to the cycle of debt, bonded child labor and poverty across generations. In this context, the effectiveness of trade sanctions as a policy response to bonded child labor is evaluated. Contrary to expectations, a trade ban can set off a sequence of increasing indebtedness among agrarian households that offset the intended (static) disincentives to employ child labor.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Reference
Baland, J.-M., and J. A. Robinson. (2000). “Is Child Labor Inefficient?” Journal of Political Economy 108(4), 663-679.
Bardhan, P. K. (1989). “A Note on Interlinked Rural Economic Arrangements.” In P. K. Bardhan (ed.), The Economic Theory of Agrarian Institutions. Oxford: Oxford University Press, pp. 237-242.
Bardhan, P. K. (1983). “Labor-Tying in a Poor Agrarian Economy: A Theoretical and Empirical Analysis,” Quarterly Journal of Economics 98, 501-514.
Basu, A. K. (2002). “Oligopsonistic Landlords, Segmented Labor Markets and the Persistence of Tied-Labor Contracts,” American Journal of Agricultural Economics 84(2), 438-453.
Basu, A. K., and N. H. Chau. (2002). “Targeting Child Labor in Debt Bondage: Evidence and Policy Implications,” World Bank Economic Review 17(2), 253-281.
Basu, A. K., N. H. Chau, and U. Grote. (2000). “Guaranteed Manufactured without Child Labor,” Working paper Series #2000-04, Department of Applied Economics and Management, Cornell University.
Basu, K. (1987). “Disneyland Monopoly, Interlinkage and Usurious Interest Rates,” Journal of Public Economics 34, 1-17.
Basu, K., and P. H. Van. (1998). “The Economics of Child Labor,” American Economic Review 88, 412-427.
Beck, T., D.-K. Asli, and R. Levine. (2000). “A New Database on Financial Development and Structure,” World Bank Economic Review September, 597-605.
Becker, G. S. (1981). A Treatise on the Family. Cambridge, MA: Harvard University Press.
Braverman, A., and T. N. Srinivasan. (1984). “Agrarian Reforms in Developing Rural Economies Characterized by Interlinked Credit and Tenancy Markets.” In H. P., Binswanger, and R. Rosenzweig (eds), Contractual Arrangements, Employment, and Wages in Rural Labor Markets in Asia. New Haven and London: Yale University Press, pp. 63-81.
Braverman, A., and J. Stiglitz. (1982). “Sharecropping and the Interlinking of Agrarian Markets,” American Economic Review 72, 695-715.
Brenton, P. (2000). Globalisation and Social Exclusion in the EU, Policy Implications. CEPS Working Document No. 159.
Bureau of Democracy, Human Rights and Labor. (1999). Country Report on Human Rights Practices for 1998. Washington DC: US Department of State.
Doepke, M. (2001). “Accounting for Fertility Decline during the Transition to Growth.” UCLA mimeo.
Eswaran, M., and A. Kotwal. (1985). “A Theory of Two-Tier Labor Markets in Agrarian Economies,” American Economic Review 75, 162-177.
Eswaran, M. (1996). “Fertility, Literacy and the Institution of Child Labor,” Manuscript. Vancouver: University of British Columbia, Department of Economics.
Galor, O., and J. Zeira. (1993). “Income Distribution and Macroeconomics,” Review of Economic Studies 60, 35-52.
Grootaert, C., and R. M. Kanbur. (1995). “Child Labour: An Economic Perspective,” International Labour Review 134(2), 187-203.
Grote, U., A. K. Basu, and D. Weinhold. (1999). “Child Labor and the International Policy Debate-The Education/Child Labor Trade-Off and the Consequences of Trade Sanctions,” ZEF-Discussion Papers on Development Policy. No. 1: Center for Development Research, Bonn.
Hazan, M., and B. Berdugo. (2002). “Child Labor, Fertility, and Economic Growth,” The Economic Journal 112(October), 810-828.
Karim, F. (1995). Contemporary Forms of Slavery in Pakistan. New York: Human Rights Watch.
Informal Sector Service Center. (1992). Bonded Labor in Nepal under the Kamaiya System. Kathmandu, Informal Sector Service Center.
IPEC (International Programme on the Elimination of Child Labour). (1992). Children in Bondage: A Call for Action. Geneva: ILO/UN Centre for Human Rights.
International Labour Office (ILO). (1993). World Labour Report. Geneva: International Labor Office.
Mukherjee, A., and D. Ray. (1995). “Labor-Tying,” Journal of Development Economics 47, 207-239.
Office of the United States Trade Representative. (1997). “Monitoring and Enforcing Trade Laws and Agreements-Fact Sheet,” Office of the United States Trade Representative, Executive Office of the President, Washington, DC, September 30.
Organization for Economic Cooperation and Development (2000). “International Trade and Core Labor Standards”. Paris: Directorate for Employment Labor and Social Affairs, OECD.
Otsuka, K., H. Chuma, and Y. Hayami. (1992). “Land and Labor Contracts in Agrarian Economics,” Journal of Economic Literature 30, 1965-2018.
Rosenzweig, M. R. (1981). “Household and Non-household Activities of Youths, Issues of Modelling, Data and Estimation Strategies.” In G. Rodgers, and G. Standing (eds), Child Work, Poverty and Underdevelopment. Geneva: International Labour Office.
Sadoulet, E. (1992). “Labor-Service Tenancy Contracts in a Latin American Context,” American Economic Review 82, 1031-1042.
Srinivasan, T. N. (1979). “Bonded Labor Contracts and Incentives to Adopt Yield-Raising Innovation in Semi-feudal Agriculture,” Economic Journal 89, 416-419.
Tucker, L. (1996). The Small Hands of Slavery, Bonded Child Labor In India. New York: Human Rights Watch.
US Department of Labor. (1995). By the Sweat and Toil of Children. Vol II. Washington DC: Bureau of Labor Affairs, US Department of Labor.
US Department of Labor. (1998). By the Sweat and Toil of Children. Vol V. Washington DC: Bureau of Labor Affairs, US Department of Labor.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Basu, A.K., Chau, N.H. Exploitation of Child Labor and the Dynamics of Debt Bondage. Journal of Economic Growth 9, 209–238 (2004). https://doi.org/10.1023/B:JOEG.0000031427.20051.38
Issue Date:
DOI: https://doi.org/10.1023/B:JOEG.0000031427.20051.38