The paper embeds child labor in a standard two-sector general-equilibrium model of a small open economy facing perfectly competitive markets, efficiency wages, and free-trade. The modern sector produces a homogeneous good using skilled adult labor and capital, and offers effort-based efficiency...

We develop a general equilibrium model of a small open economy with performance-pay worker compensation and occupational choice. We analytically and numerically examine the distributional effects of entrepreneurial talent and performance-pay contracts. Risk-neutral, more talented individuals...