Working Paper: CEPR ID: DP6259
Authors: Jean-Marie Baland; Cédric Duprez
Abstract: In this paper, we develop a model of North-South trade to analyze the impact of a label certifying the absence of child labour in the export production of the South. When most eligible producers in the South can obtain the label, its impact is considerably reduced by a displacement effect whereby adult workers replace children in the export sector while children replace adults in the domestic sector. The label is then unable to create a price differential between goods produced under the label and those produced without it. When only a small fraction of eligible producers have access to the label, so that the South exports both labelled and unlabelled production to the North, labelled producers generally gain while those without a label generally loose from the introduction of the label. Ex ante welfare may thus fall in the South if the probability of getting a label when one qualifies is small. The impact on child labour is in general ambiguous, as the reaction of child labour to higher or lower adult and children wages depends on the strength of income and substitution effects.
Keywords: Child Labour; Fair Trade; Label
JEL Codes: F02; F16; O10; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fair trade labels (F10) | child labor (J82) |
| majority of eligible producers can obtain label (Q13) | displacement effect (adult workers replace child laborers) (J82) |
| displacement effect (adult workers replace child laborers) (J82) | ambiguous effects on child labor (J82) |
| small fraction of eligible producers can obtain label (Q13) | labeled producers benefit (Q13) |
| small fraction of eligible producers can obtain label (Q13) | those without label suffer (I12) |
| interplay between income and substitution effects (H31) | ambiguous impacts on child labor (J82) |
| labeled goods may initially seem beneficial (D18) | actual outcomes are complex and context-dependent (D80) |
| certain conditions (C62) | potential for increased child labor (J82) |