Patrick M. Emerson

Is There a Child Labor Trap? Intergenerational Persistence of Child Labor in Brazil*

This paper examines inter-generational persistence in child labor by developing a dynamic model and exploring its implications empirically in Brazil. We begin by building a simple overlapping generations model of the household child labor decision. We assume that this decision is made by the head of the household, where parents decide to send their child to work only if by doing so the childi?½s contribution to the present consumption of the family outweighs the future consumption benefit the family would enjoy from keeping the child in school. The main predictions of the model are that children are more likely to work when they come from households with parents who were child laborers, from households with parents who have lower educational attainment and that child labor has adverse effects on childreni?½s educational attainment and their adult earnings. Evidence of persistence in child labor is found by examining household survey data from Brazil. We exploit the fact that the survey data includes information on child labor of both parents and children in a household, as well as information on the educational achievement of the grandparents. We find that children are more likely to be child laborers the younger their parents were when they entered the labor force and the lower the educational attainment of the parents and of the grandparents. Another important finding is that individuals who start work at a younger age tend to end up with lower earnings as adults suggesting that the vocational training aspect of child labor does not the negative effect from loss of schooling.

Is child labor harmful? The impact of working earlier in life on adult earnings

This paper explores the question: is working as a child harmful to an individual in terms of adult outcomes in earnings? Although this is an extremely important question, little is known about the effect of child labor on adult outcomes. Estimations of an instrumental variables earnings model on data from Brazil show that child labor has a large negative impact on adult earnings for male children even when controlling for schooling and that the negative impact of starting to work as a child reverses at around ages 12–14.

The Economics of Tenancy Rent Control

We consider a rent control regime where rent increases on, and eviction of, a sitting tenant are forbidden. When apartments become vacant landlords may negotiate new rents. If inflation exists, landlords prefer to rent to short-staying tenants. Since departure-date-contingent contracts are forbidden and landlords cannot tell whether tenants are short-stayers, an adverse selection problem arises, with a Pareto inefficient equilibrium. When tenant types are determined endogenously, multiple equilibria can arise where one equilibrium is Pareto dominated. Abolition of the rent control regime, cannot only shift the equilibrium out of this inferior outcome, but also result in across-the-board lowering of rents.

Opportunity, Inequality and the Intergenerational Transmission of Child Labour

This paper presents a model in which opportunity differences within society result in child labour, where ‘opportunity’ is broadly defined but can include school quality, access to higher paying jobs, access to information about the returns to education and actual discrimination. If opportunity differences exist, child labour and poverty are shown to be symptomatic of this underlying socioeconomic condition. It is then shown that policies that ban child labour and/or introduce compulsory education laws can actually reduce dynastic welfare, increase poverty and further exacerbate income inequality within society, because they treat the symptom rather than the disease: the lack of opportunity.

Child labor and learning

This paper investigates the impact of working while in school on learning outcomes through the use of a unique micro panel dataset of Brazilian students. The potential endogeneity is addressed through the use of di erence-in-di erence and instrumental variable estimators. A negative e ect of working on learning outcomes in both math and Portuguese is found. The e ects of child work range from 3% to 8% of a standard deviation decline in test score which represents a loss of about a quarter to a half of a year of learning on average. We also explore the minimum legal age to entry in the labor market to induce an exogenous variation in child labor status. The results reinforce the detrimental e ects of child labor on learning. Additionally, it is found that this e ect is likely due to the interference of work with the time kids can devote to school and school work.

Multidimensional separating equilibria and moral hazard: An empirical study of National Football League contract negotiations

This paper empirically tests for a multidimensional separating equilibrium in contract negotiations and tests for evidence of the moral hazard inherent in many contracts. Using contract and performance data on players drafted into the National Football League from 1986 through 1991, we find evidence that players use delay to agreement and incentive clauses to reveal their private information during contract negotiations. In addition, our empirical tests of the moral hazard issue indicate that a players effort level is influenced by the structure of his contract.

Bounded Rationality, Expectations, and Child Labour

This paper develops a model with overlapping generations, where the households optimal fertility, child labour, and education decisions depend on the parents expectations or beliefs about the return to education. It is shown that there exists a range of parental income where the fertility rate is high and children participate in the labour market and receive an incomplete education if a parent believes the return to education is low. The act of participating in the labour market reduces the childs ability to accumulate human capital; thus, the action of sending a child into the labour market is sufficient to ensure that the parents initially pessimistic expectations are fulfilled. It is then shown that a onetime policy intervention, such as banning child labour and mandatory education, can be enough to move a country from the positive child labour equilibrium to an equilibrium with no child labour.

Microloans, education and growth

This paper constructs a two‐period overlapping generations model of human capital investment decisions where a microloan program designed to finance entrepreneurial activities is active. It is shown that, in the presence of human capital externalities, microloans that are small and have immediate repayment can be growth depressing, and welfare decreasing, through their effect on the opportunity cost of schooling. By increasing the opportunity cost of schooling, such microloans divert investment away from human capital: by failing to internalize the social returns to education, households’ individually optimal investment decisions in the face of microcredit availability act to depress the growth of the economy and result in suboptimal welfare outcomes. Conditions under which these negative effects can occur are identified and potential solutions are suggested.

Still Waiting for Mister Right? Asymmetric Information, Abortion Laws and the Timing of Marriage

Previous studies have suggested that more liberal abortion laws should lead to a decrease in marriage rates among young women as ‘shotgun weddings’ are no longer necessary. Empirical evidence from the United States lends support to that hypothesis. This article presents an alternative theory of abortion access and marriage based on the cost of search which suggests that more liberal abortion laws may actually promote young marriage. An empirical examination of marriage data from Eastern Europe shows that countries that liberalized their abortion laws saw an increase in marriage rates among nonteenage women.