Child Labor Standards in Regional Trade Agreements: Theory and Evidence

We study the impact of child labor standards in Regional Trade Agreements (RTAs) on a variety of child labor market outcomes, including employment, education, and household inequality. We develop a stylized general equilibrium model of child labor in an economy open to international trade and consider the impact of RTAs with and without child labor bans. We empirically investigate the effects of these clauses in trade agreements in a broad international panel of 101 developing countries using harmonized survey microdata. Exploiting quasi-experimental methods to obtain plausibly causal estimates, we find that RTAs without child-labor bans lead to reductions in child employment and increases in school enrollment, particularly for older children aged 14--17. Child labor bans in RTAs perversely increase child employment among 14--17 year olds and decrease school enrollment for both young and older children. These effects appear to decrease inter-household income inequality through increased child earnings. Our findings are consistent with theoretical predictions from our model and the literature on child labor bans.