IZA DP No. 16067: Can a Ban on Child Labour Be Self-Enforcing?
A series of articles beginning with Basu and Van (1989) argue that a ban on child labour may be self-enforcing in the sense that, once an equilibrium where only adults work is established, parents may have no incentive to depart from it, and the ban is no longer required. This important result was originally obtained under the assumption that parents would rather see their children do nothing and consume the minimum necessary to survive, than do even a very small amount of work and consume more. We show that it holds also if education is a valuable alternative to child labour, and the disutility of the latter can be compensated by the utility of present consumption or future earning capacity. If children work for their parents as well as in the labour market, however, and the second type of work is observable by the policy maker, but the first is not, a ban can only apply to market work. Paradoxically, a child labour ban may be effective in reducing child labour under such circumstances if it would not be self- enforcing under the alternative ones.