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Development Economics. Child labour. Outline. Introduction What is child labour? What drives child labour ? Fighting child labour: policies. 1. What is child labour? . Basics:. child under age 15 (ILO convention 138) Often statistics include children aged 15 to17 labour

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Development Economics

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Development economics l.jpg

Development Economics

Child labour.


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Outline

  • Introduction

  • What is child labour?

  • What drives child labour ?

  • Fighting child labour: policies.


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1. What is child labour?


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Basics:

  • child

    • under age 15 (ILO convention 138)

    • Often statistics include children aged 15 to17

  • labour

    • “the person does work on a regular basis for which he or she is remunerated or that results in output destined for the market.” (Indian census)


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Definitions

  • Economic activity: encompasses most productive activities, including unpaid, illegal work or in informal sector

  • Child labour: covers economic activities for children who either:

    • Are below age 12

    • Are between 12 and 14 years old and do more than “light work”

    • Are between 15 and 17 and undertake hazardous work.

      (ILO conventions)

  • Hazardous work: has adverse effect on child development (health, safety...); by the activity (conditions) or the number of hours

  • Unconditional worst forms of child labour: traffic, prostitution, armed conflicts...


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In 2000:


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By region


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  • Asia has the highest number of working children

  • But:

    • African children have a higher risk of being at work.

    • Children are engaged in economic activities much younger in Africa than in Asia

    • Child labour declines much faster in Asia than in Africa.


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What are the trends?


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By gender:


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but

  • The above table doesn’t include domestic chores (done by children in their own household):

    • Cleaning, cooking, laundry...

    • Fetch water, wood...

    • Taking care of the elderly, babies, sick people.

  • Taking it into account reverse the above result: girls are in fact more likely to work

    • Higher participation & longer hours.


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Age profile:


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Other important features

  • Overwhelmingly rural

    • 70% of working children are doing agricultural tasks.

    • Most of them work with their parents (ex: CI: 35.3% inside hh, 6.2% outside; Laos: 29.3 and 3.9%)

    • Rural bias stronger in Africa.

  • Most often, unpaid work

    • In Senegal, 71% of working children aged 11 to 17 are unpaid (14.5% in apprenticeship, 7.5% working for a wage and 5% self-employed).


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Hours


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Data issues

  • Difficult to measure labour hours

    • Specially for children (no contracts...)

  • No (low) occurrences of worst (hazardous) forms of child labour in household surveys

    • Specialized survey

    • In hh survey: exposure to chemicals, heat, work injuries, long hours in agriculture


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Is child labour a problem?

  • It may prevent children to go to school

  • Through :

    • Concurrence between activities

    • Tiredness, less time spent on homework

    • Lower human capital accumulation (drop-outs, repetition...)

  • But

    • Causality difficult to identify: are children at work because they left school or the reverse?

    • Unobservable (abilities, preferences...) affect both education & labour choices.

    • Low performance students are more likely to engage in work activities

  • A lot of children do both

    • Work on hh farm (during holidays)

    • School only half of the day

    • 1h of work does not necessarily imply 1h less of education

  • 2 questions:

    • Trade-off – time allocation between school & work

    • Implications of work on schooling


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Few contributions

  • Bangladesh FFE (Wodon & Ravallion)

    • child labor falls – 30% for boys, 16% for girls

    • But only 25% (12%) of the increase in education attendance for boys (girls)

  • Progresa

    • Schultz : Child labour falls by around 14% (sign for girls) at 2ndary level

    • Parker & Skoufias: increase in education associated to the same reduction in participation to economic activities for boys (less for girls)

  • Boozer & Suri, Ghana:

    • Rain affect child labour demand but uncorrelated with long-term returns to education

    • 1 more hour of labour decreases attendance by 0.38h.


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  • Work could slow academic progress, but it is the case mainly for long hours:

    • Dumas, Senegal:Child labour (participation) doesn’t decrease test scores, for a given number of years of schooling

    • Bangladesh (Canals-Cerdo & Ridao-Cano): early work participation slows progress and decreases the probability to enter secondary school.

  • Returns to experience:

    • Experience gained by working also has positive returns: in Vietnam, for a child working 7 hours a week during childhood, the loss in education is greater than the return to additionnal experience only from age 30 onwards.(Beegle et alii, 2006)


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  • Impact on health

  • Intergenerational poverty trap:

    • vicious (poverty trap)

      • poor hhs  need to make their children work  kids earn less when grown-up  poor hhs

    • virtuous – some jump occurs

      • poor hhs  get educated  kids earn more  better off hhs  kids educated  earn more


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2. What drives child labour?

  • Poverty?

  • Low returns to education?

    • Few alternative time uses

  • Credit constraints?

  • Labour markets imperfections?

    • Child opportunity cost is high if you don’t have access to other workforce


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Framing the decisionlabour vs education

  • 3 sources of benefits

    • earnings from the child

    • savings from reduced education spending

    • specific human capital returns = experience

  • Costs

    • lower earnings when child enters labour market with lower schooling

    • foregone non-market benefits from schooling (education good for home production, child rearing)

    • well educated workers may increase productivity of the group

    • well educated participate more in society

  • What is the trade-off between education and labour?


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Child labour and income

  • Why living standards improvement should lead to lower work participation of children:

    • Child labour viewed as a bad in hh’s welfare function

    • With diminishing marginal utility of income, the value of child’s contribution decreases with income

    • Higher income facilitates purchase of substitutes for child labour (fertilizer...)

    • Child’s productivity at school may increase when buying other schooling inputs (textbooks)


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Cross-country evidence


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Poverty impact – Theoretical framework.

  • Basu & Van 1998:

    • Hyp: Parents dislike child labour and use it only to reach subsistence level (luxury axiom)

    • Possible substitution between adult and child labour (substitution axiom)

      • “Nimble fingers”? Not supported

      • Hence, child labour depresses adult wages

    • 2 equilibriums:

      • 1 with low adult wages → poverty → child labour → low wages

      • 1 with high adult wages → no poverty → no child labour → high wages


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Poverty – policy implications

  • Ban could permit to switch from the low equilibrium to the high one

  • If assumptions are wrong or if partial ban (equilibrium does not switch)

    • People are worse-off after the ban because they can’t survive

  • Difficulties:

    • Enforcing a ban (notably) for work within the household

    • Historical experience doesn’t find strong evidence on the role of the child labour legislation on the decrease of CL;


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Poverty impact? - empirics

  • Estimation of the relationship:

    Work = αPoverty + u

  • Issues:

    • How to choose the relevant poverty line?

    • Endogeneity

      • If child works for escaping poverty then reverse causality

      • Poverty without counting child income?

        • But all household members labour supplies are chosen simultaneously

    • No good study specified like that – need an exogenous transfer to instrument poverty


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Empirics (2)

  • Exogenous changes in income transfers (pension reform, see education lecture)

    • Edmonds, south Africa: decrease in labour time of adolescent children (-1 hour per day, starting from 3); no change in participation.

    • Carvalho, Brazil: same kind of effects, weaker.


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Empirics (3)

  • Impact of change in wage: Bhalotra

    • Estimation of the own wage elasticity of child labour

    • Work (in hours) = β Child wage + v

    • If people need to meet a given threshold, then β<0: need to spend less time working in order to meet the subsistence level

    • If children are working for another reason (insufficient returns to education) then increases opportunity cost and β>0


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  • Results :

    • Rural Pakistan

    • Accepts (weak) poverty hypothesis for boys, not for girls

  • Issues:

    • Very limited number of observations (50), since need a wage.


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  • Dumas

    • Economic model of the same spirit with rural households

    • Relationship with land area:

      • Income effect: reduce child labour

      • Substitution effect: raises opportunity cost if not perfect labour markets and thus increases child labour


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  • Results on rural Burkina Faso (80’s):

    • Child labour increases with land area

    • Rejection of subsistence hypothesis

    • Same results based on

      • Mueller, Botswana

      • Bhalotra & Heady, Pakistan & Ghana

  • Means that

    • In these cases, child labour is driven by imperfection of labour markets rather than poverty

    • No strong aversion against child labour

      • especially when there is no alternative use of child’s time

      • specific human capital


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Why are labour markets imperfect?

  • Information asymmetries

    • Family labour is more efficient

  • Seasonality

    • If everybody has a plot to crop then almost impossible to find a worker for the harvest

  • Efficiency wage

    • If employers decide to provide higher wage than the equilibrium wage (clears the market) then unemployment


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Impact of changes in output prices:

  • If output prices increases:

    • Income effect: household “buys” more child leisure

    • Substitution effect: opportunity cost increases which lead to a higher use of child labour


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Evidence

  • Kruger (Brazil) coffee prices rise  school attendance decreases, child labor increases

  • Cogneau and Jedwab (Côte d’Ivoire), cocoa prices cut by half  child labor increases, enrolment decreases, health deteriorates.

  • Edmonds and Pavcnik (Vietnam) as rice prices rise  child labor declines. Difference between net producers and net consumers of rice.

  • No easy conclusion


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Transitory poverty - shocks

  • short term income fluctuations, credit should be able to smooth

    • Jacoby & Skoufias (India)– transitory shocks  lower school attendance

      • But full insurance would lead to increase human capital only by 2% over 3 years.

    • Beegle, et. al. (Tanzania) transitory shock  increase in child labor, esp. for poorer households

    • Durya et al (Brazil) children work more when adult unemployed

    • Edmonds (S. Africa) households can’t even borrow against sure income – current pension recipients kids go to school, work less


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  • Hence, improving insurance or credit market might help.

  • DeJanvry & alii (Mexico): the role of safety net played by Progresa transfers indeed prevent some children to drop out of school, even if they start working following an income shock.


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Other problem with credit market imperfections

  • Children in bondage

    • Collateral

    • Child enters bondage when his parents take out a debt from an employer against future earnings

    • Very difficult to repay debt and exit bondage

    • Often inheritable


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4. Policy options

  • Several levels of intervention: supra-national, extra-national, national

  • Various approaches: coercive, incentive

  • Various targets: child labour, education.


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Supranational

  • ILO, WTO, UNICEF

    • Ban child labour

      • Enforcement difficult

      • Consequences in terms of welfare difficult to assess, but bad if due to poverty

      • No evidence of any impact of ILO convention ratification


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Extra-national

  • Sanctions on countries using child labour

    • e.g. US/Harkin Bill

    • hijacked by protectionists

  • Boycott or labeling

    • Welfare impact : depend on what children who are removed from the traded sector are they doing instead :

      • Children might just be moved to sectors that trade only domestically.→ their working conditions might not be improved?

      • Might carry on working for lower child wages

        • demand for output from child labour falls

        • Fining firms using child labour depresses child wages

      • lower child labour (wages)  lower hh incomes  worse poverty?

      • Impact on adult labour probably nil because it concerns only very few children, relative to the size of the adult workforce (10000 children in Bangladesh garment industry = 0,1% of working children in the country)


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National

  • Ban: Moehling (US):

    • little evidence that minimum age laws for manufacturing employment (1880-1910) contributed to the decline in child labour

  • Incentive policies:

    • Supply side: Increase school supply, quality

      • payoff is still way off

    • Demand side: Pay parents to send kids to school

      • grant, slightly less than earnings

      • conditional on low income, and kid’s enrollment in school

      • Seems to work best!


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