Is Child Labor Inefficient?

Date Published:

Sep 1, 2000


Journal of Political Economy, 108, 663-679

We build a model of child labor and study its implications for welfare. We assume that there is at trade–off between child labor and the accumulation of human capital. Even if parents are altruistic and child labor is socially inefficient, it may arise in equilibrium because parents fail to fully internalize its negative effects. This occurs when bequests are zero or when capital markets are imperfect. We also study the effects of a simple ban on child labor and derive conditions under which it may be Pareto improving in general equilibrium. We show that the implications of child labor for fertility are ambiguous.