NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

On the Distributional Consequences of Child Labor Legislation

Dirk Krueger, Jessica Tjornhom Donohue

NBER Working Paper No. 10347
Issued in March 2004
NBER Program(s):   EFG   LS   CH

In this paper we construct a dynamic heterogeneous agent general equilibrium model to quantify the effects of child labor legislation on human capital accumulation and the distribution of wealth and welfare. Crucial model elements include a human capital externality in the market sector, an informal home production sector in which child labor laws cannot be enforced, uninsurable idiosyncratic income risk, borrowing constraints, and endogenous wage and interest rate determination in general equilibrium. We calibrate the model to US data around 1880 and find that the welfare consequences for individual households of a transition to policies that restrict child labor or provide tax-financed free education depend crucially on the main source of a households' income. Whereas households with significant financial asset holdings unambiguously lose from any government intervention, high-wage workers benefit most from a ban on child labor, while low-wage workers benefit most from free education. Based on a utilitarian social welfare function, the introduction of free education results in substantial welfare gains, in the order of 3% of consumption, mainly because it leads to higher human capital accumulation. A child labor ban, in contrast, induces (small) welfare losses because it reduces income opportunities for poor families without being effective in stimulating education attainment.

download in pdf format
   (495 K)

email paper

This paper is available as PDF (495 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10347

Published: Dirk Krueger & Jessica Tjornhom Donohue, 2005. "On The Distributional Consequences Of Child Labor Legislation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 785-815, 08.

Users who downloaded this paper also downloaded these:
Doepke and Krueger w12665 Origins and Consequences of Child Labor Restrictions: A Macroeconomic Perspective
Beegle, Dehejia, and Gatti w10980 Why Should We Care About Child Labor? The Education, Labor Market, and Health Consequences of Child Labor
Edmonds w12926 Child Labor
Edmonds and Pavcnik w10317 International Trade and Child Labor: Cross-Country Evidence
Beegle, Dehejia, and Gatti w10088 Child Labor, Crop Shocks, and Credit Constraints
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us