Should child labor be banned outright? Should the World Trade Organization be given the responsibility to discourage child labor using trade sanctions? The answer to this complicated problem depends on the economic milieu, says Basu. At least 120 million of the world's children aged 5 to 14 worked full-time in 1995, most of them under hazardous, unhygienic conditions, for more than 10 hours a day. This is an old problem worldwide but particularly so in Third World countries in recent decades. What has changed, with globalization, is our awareness of these child laborers. (The International Labour Organisation distinguishes between child work, which could include light household chores and could have some learning value, and child labor, a pejorative phrase.) By bringing together the main theoretical ideas, Basu hopes to encourage both more theoretical research and empirical work with a better theoretical foundation. Among other things, Basu observes that: ° The problem is most serious in Africa, where the child-labor participation rate is 26.2 percent. The rate is 12.8 percent in Asia. But since 1950, the trend is a decline in that participation rate worldwide. For most Latin American countries, the decline is notable but less marked than in Asia. In large parts of Africa, including Ethiopia, the problem has been extremely persistent, but even there the trend is downward. ° Child labor has not always been considered evil, and there is no consensus on why it began to decline. In some (not all) countries legislative acts declared it illegal, in some there were rules about compulsory education, and increasing prosperity generally made families less likely to experience poverty if their children weren't working. ° Mandating compulsory education is regarded as more effective than outlawing child labor, because attendance at school is easier to monitor, but some experts believe economic progress is the answer to the problem. The justification for many interventions is that the state is more concerned about the well-being of children than their parents are; Basu believes such an assumption to be wrong when child labor occurs as a mass phenomenon rather than as isolated abuse. Basu argues that, in some economies, the market for labor may exhibit multiple equilibria, with one equilibrium having low adult wage and a high incidence of child labor and another equilibrium exhibiting high adult wage and no child labor. The model is used to provide a framework for analyzing the role of international labor standards. This paper - a product of the Office of the Senior Vice President, Development Economics - is part of a larger effort in the Bank to promote understanding of the causes of child labor. The study was funded by the Bank`s Research Support Budget under the research project Literacy and Child Labor (RPO 683-07). The author may be contacted at kbasu@worldbank.org.

Child Labor: Cause, Consequence, and Cure, with Remarks on International Labor Standards

The problem of child labor has moved from a matter of regional and national concern to one of international debate and possible global persuasion and policy intervention. In crafting policy for mitigating this enormous problem of our times, it is important to start with a proper theoretical and empirical understanding of the phenomenon. What gives rise to child labor, and what are its consequences? What interventions might end child labor without hurting children? A well-meaning but poorly designed policy can exacerbate the poverty in which these laboring children live, even leading to starvation. The article surveys the large and rapidly growing literature on this subject, focusing mainly on the new literature based on modern economic theory and econometrics. It also looks at some of the broad policy implications of these new findings, with the objective of contributing to better informed discussion and policy design.

/pdf/the-global-child-labor-problem-what-do-we-know-and-what-can-20giz14vzq.pdf

The Global Child Labor Problem: What Do We Know and What Can We Do?

Using data from Peru and Pakistan, this article tests two hypotheses: there is a positive association between hours of child labor and poverty, and there is a negative association between child schooling and poverty. Both of these hypotheses are confirmed by the Pakistani data, but not by the Peruvian data. The reduction in poverty rates due to income from children's labor is greater in Pakistan than in Peru. The nature of interaction between adult and child labor markets varies with the gender of the child and the adult. In Peru rising men's wages significantly reduce the labor hours of girls, whereas in Pakistan there is a strong complementarity between women's and girls' labor markets. Both data sets agree on the positive role that increasing adult education can play in improving child welfare.

Child labor, child schooling, and their interaction with adult labor : empirical evidence for Peru and Pakistan

This paper investigates the dynamic causal linkages amongst nine major international stock price indexes. In order to gauge the causal transmission patterns we employ very recent methods of: (i) vector error-correction modeling and (ii) level VAR modeling with possibly integrated and cointegrated processes, advocated by: (i) Toda and Phillips (Econometrica, 61 (1993) 1367) and (ii) Toda and Yamamoto (J. Econometrics, 66 (1995) 225), respectively. The paper illustrates how such methods may be appropriately augmented in a compatible fashion to unearth previously unfounded linkage properties inherent amongst a system of stock price indexes. In particular, we demonstrate that previous research, by using ordinary difference VARs, ignored an important component of linkages displayed purely over the long run. This untapped evidence essentially provides robust and very useful information to international financial analysts and investors. At a substantive level, results of this study tend to support the contention offered by several studies in the literature of significant interdependencies between the established OECD and the Asian markets, and also the leadership of the US and UK markets over the short and long run. The levels VAR, however, illustrate the Japanese market's influence as an additional long run leader. Findings seem to be plausible given that these three markets (US, UK and Japan) have consistently contributed over 75% of global stock market capitalization over the major part of the sample under consideration. At a methodological level, this analysis also provides a primer for the wealth of applied financial econometric research focusing on dynamic causal inference which involve systems containing possibly integrated and cointegrated processes.

Long and short term dynamic causal transmission amongst international stock markets

Does child labor decrease as household income rises? This question has important implications for the design of policy on child labor. This paper focuses on a program of unconditional cash transfers in Ecuador. It argues that the effect of a small increase in household income on child labor should be concentrated among children most vulnerable to transitioning from schooling to work. The paper finds support for this hypothesis. Cash transfers have small effects on child time allocation at peak school attendance ages and among children already out of school at baseline, but have large impacts at ages and in groups most likely to leave school and start work. Additional income is associated with a decline in paid work that takes place away from the child's home. Declines in work for pay are associated with increases in school enrollment, especially for girls. Increases in schooling are matched by an increase in education expenditures that appears to absorb most of the cash transfer. However, total household expenditures do not increase with the transfer and appear to fall in households most impacted by the transfer because of the decline in child labor.

https://papers.ssrn.com/sol3/Delivery.cfm/4702.pdf?abstractid=1259574&mirid=1

Poverty Alleviation and Child Labor

Investigates the use of children in the production of handknotted rugs primarely for export. Based on a survey of 362 carpet weaving enterprises in India. The sample survey of enterprises is supplemented with in-depth case studies of employers, exporters, and U.S. importers.

Is child labour really necessary in India’s carpet industry?

The paper attempts to understand the interlinkages and causal relationship between the Nasdaq composite index in the US, the Nikkei in Japan with that of NSE Nifty and BSE Sensex in India during th...

Is the Indian Stock Market Integrated with the US and Japanese Markets? An Empirical Analysis

This paper attempts to seek evidence for the weak form efficient market hypothesis using the daily data for stock indices of the National Stock Exchange, Nifty, and the Bombay Stock Exchange, Sensex, for the period of 1999-2004. The random walk hypothesis for the Nifty and the Sensex stock indices is rejected. Both the stock markets have become relatively more inefficient in the recent periods, and have high and increasing volatility. Non-parametric tests also indicate that the distribution of the underlying variables are not normal and the deviation from normality has become higher in recent years. Both the indices show a negative autocorrelation at lag 2, indicating over-reaction one day after information arrival, followed by a correction on the next day. The study suggests immediate dissemination of information on foreign institutional investor trades and equity holding and the need to improve free float of equity to move towards efficiency.

Testing Weak Form Efficiency for Indian Stock Markets

This paper examines the relationship between foreign institutional investment and stock returns in India during 2002-04. The Foreign Institutional Investment as a percentage of market capitalization and floating stock has been improving over the years. Using NSE Nifty and FII capital flows to the equity market, Granger-causality, Cross-correlation method and GARCH have been applied to analyze the static and dynamic relationship between FII flows and Nifty. Granger-causality shows a unidirectional relationship, indicating that equity returns cause FII flows, whereas Cross-correlation method shows some evidence of contemporaneous and bi-directional causality. This is an interesting result not reported earlier, and it is possible that the impact may be strong at the level of individual stock prices. The Foreign Institutional Investors (FIIs) seem to be positive feedback traders, as there is a strong positive relationship with lagged daily returns, and the results also show a significant relationship with future equity returns. Individually, there is significant volatility clustering in FII investments and Nifty series but there is no transmission or destabilizing effect. It is suggested that information on trade by FIIs must be made publicly available more speedily.

Foreign Institutional Investment Flows and Equity Returns in India

This study examines the relationship of FII flows with firm level stock returns in the Indian equity market. The globalization process and the recent reforms in the Indian financial sector have given the FIIs a strategy for international diversification of portfolios, and for hedging risk. At the aggregate level, FII investments and NSE Nifty seem to have a strong unidirectional causality with some weak evidence of bi-directional causality. The authors conducted a Granger causality test to check the direction of causality at the firm level, and Garch(1,1) for volatility and spillover effect. The study has been conducted on 36 listed firms during the period from August 2002 to August 2004. The results show the existence of bi-directional causality between stock returns and FII flows and vice-versa in 13 firms, and uni-directional causality running from stock returns to FII flows in 21 firms. The role of FIIs becomes important in influencing equity returns at the firm level, especially in the government-owned companies. It seems that FIIs are value investing in anticipation of further reforms that is driving up the equity returns. There is volatility clustering in individual series but no transmission from one to another, except for one key company. Therefore, there is very little destabilizing effect of FII flows on individual equity returns of the firms during the period of study.

Shahid Ashraf

Papers

Is child labour really necessary in India’s carpet industry?

Is the Indian Stock Market Integrated with the US and Japanese Markets? An Empirical Analysis

Testing Weak Form Efficiency for Indian Stock Markets

Foreign Institutional Investment Flows and Equity Returns in India

An Empirical Investigation of FIIs Role in the Indian Equity Market: A Firm Level Analysis