A revisionist view of the economic implications of child labor regulations

Abstract

The conventional neoclassical wisdom predicts that banning, restricting, or improving the working conditions of child labor will increase the costs of production, thereby diminishing the competitiveness of those jurisdictions that legislate against child labor. However, from a behavioral theoretical perspective this need not be the case when a productivity differential favoring adult labor exists which at least compensates for the pay differential between child and adult labor, and where the increased cost of child labor is compensated for by their increased productivity. In this case, legislating against child labor will not have the negative economic consequences predicted by the conventional wisdom. The cost of such restrictions, however, will then fall largely on the family income of affected families unless compensated for by sufficient increases in real adult wages, increases in the adult labor force participation rate, or other sources of income.