Globalization Reduces Child Labor in Vietnam

Summary of working paper 8760
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Households appear to have taken advantage of higher income after the rice price increase to reduce child labor despite increased earning opportunities for children.

In the ongoing debate about the wisdom of deliberately seeking a globalized marketplace, a recurring criticism is that for poor developing countries, integration inevitably will lead to an increase in child labor. The argument holds that globalization, by boosting demands for cheap exports from poor countries, provides an incentive for children to enter the workplace by either increasing their wages or expanding opportunities for their employment.

Yet in Does Globalization Increase Child Labor? Evidence from Vietnam (NBER Working Paper No. 8760), authors Eric Edmonds and Nina Pavcnik show that globalization in fact may be having the opposite effect. They conclude that Vietnam's efforts to become a significant player in global rice markets are linked directly to a decrease in child labor. Furthermore, their findings suggest that using trade sanctions to combat child labor in developing countries could be counter-productive.

Edmonds and Pavcnik focus on the impact of Vietnam's decision in 1993 to begin lifting export restrictions that, in the interest of domestic food security and suppressing domestic prices, had constrained the ability of rice farmers to sell their crop abroad. This liberalization allowed Vietnamese rice exports to more than double between 1993 and 1998, with the demand from global markets contributing to a 30 percent rise in the price of Vietnamese rice.

Given that so many Vietnamese households are involved in rice production, rather than inducing more parents to put their children to work, the extra income produced by the price increase appears to have provided them with the means to take them off the job. Edmonds and Pavcnik discovered that a 30 percent increase in the price of rice was associated with a 9 percent drop in child labor. Overall, the authors note that between 1993 and 1998, 2.2 million children stopped working in Vietnam. They assert that almost half of that decline, the exit from the labor market of about 1 million children, can be attributed to the export-fueled rise in rice prices. "Greater integration into international markets, at least in this case, is associated with less child labor," they conclude.

The positive effects of rice price increases were most pronounced for those children who bore the largest burden of household work: older girls. For girls 14 to 15, the 30 percent price hike resulted in a dramatic increase in school attendance. However, overall child labor rates actually increased in urban areas where the higher cost of rice placed additional burdens on household incomes without providing any benefits.

By linking trade liberalization with such a large overall decline in child labor, Edmonds and Pavcnik say their study has "several implications for the policy debate on globalization and child labor." First, they point out that while globalization's critics generally assume that in developing countries, an increase in earning opportunities provides an incentive to put more children to work, in Vietnam "households appear to have taken advantage of higher income after the rice price increase to reduce child labor despite increased earning opportunities for children."

Edmonds and Pavcnik also believe their results should give pause to globalization opponents and trade policymakers who believe the best way to fight child labor is for rich countries to use trade sanctions to pressure poor countries. "These trade measures are likely to lower the price of the exported good, so our results suggest that sanctions could instigate more rather than less child labor," they write.

Finally, Edmonds and Pavcnik acknowledge that trade liberalization could have "different implications for child labor" if the result is cheaper imports flowing into developing countries that displace domestic products and the household incomes they generate. However, the authors assert that in "poor, relatively unskilled, labor abundant economies" such as Vietnam, most people work in either nontraded sectors or export-oriented sectors.

And "integration leads to higher prices in the export sectors," they note, which in Vietnam produced additional household income that "appears to be associated with a substantial reduction in child labor."

-- Matthew Davis