Trade Sanctions, Adult Unemployment and the Supply of Child Labour: A Theoretical Analysis

Abstract

This article considers a competitive general equilibrium model of a small, open less developed economy which exports products using child labour, the supply of which varies inversely with the rate of unemployment in the adult labour market. The effects of policies such as trade sanctions and the subsidisation or protection of adult labour are analysed. It is suggested that the former may actually aggravate the child labour problem, if the unemployment effect dominates the wage effect. On the other hand, theoretical analysis indicates that trade and fiscal policies influencing the effective producers' price of the products of adult labour might be a more effective approach to the problem.

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