Why Banning the Worst Forms of Child Labour Would Hurt Poor Countries

Although it is intuitive and morally compelling that the worst forms of child labour should be eliminated, banning them in poor countries is unlikely to be welfare improving and can come at the expense of human capital accumulation. We show that the existence of harmful forms of child labour, in fact, has an economic role: it helps keep wages for child labour high enough to allow human capital accumulation. Therefore, unless appropriate mechanisms are designed to mitigate the decline in child labour wages caused by reduced employment options for children, a ban on harmful forms of child labour will likely prove undesirable in poor countries. We perform our analysis within a simple two-period model of parental investment in children's education and nutritional quality.