Child Labour and Inequality

This paper focuses on the evolution of child labour, fertility and human capital in an economy with two production sectors and two types of workers endowed with two different levels of human capital. Adults allocate their time endowment between work and child rearing and choose the time allocation of children between schooling and work. The heterogeneity between low and high skilled workers allows for an endogenous analysis of inequality generated by child labour. We show that the persistence of child labour can be explained through the competition between children and low-skilled workers. This persistence, in turn, can easily induce an increase in the inequality and an average impoverishment within the country.