Child Labour and Trade-Related Price Policies in a Developing Economy: A Trade-Theoretical Analysis

The paper attempts to analyse the effectiveness of different trade-related price policies that affect the incidence of child labour in a small open developing economy using a four-factor, four-sector general equilibrium model with endogenized supply of child labour which is derived from household’s utility maximizing behaviour. In doing so, the households are assumed to be altruistic towards child’s leisure. Child labour supply is obtained as a negative function of adult wage and positive function of child wage rate. We show that the effectiveness of various trade-related price policies, namely, a price subsidy to the backward agriculture, tariff-based protectionist policy and trade sanctions, crucially hinges on relative factor intensity of different sectors, variation in adult and child wage rate and quality of employment. It is suggested that an agriculture price subsidy and trade sanction may aggravate the problem of child labour; on the other hand, a tariff-based protectionist policy lowers the incidence of child labour under few sufficient conditions.