Perverse Consequences of Well Intentioned Regulation: Evidence from India’s Child Labor Ban

by Prashant Bharadwaj, Leah K. Lakdawala, Nicholas Li – #19602 (CH DEV)

Abstract:

While bans against child labor are a common policy tool, there is very little empirical evidence validating their effectiveness. In this paper, we examine the consequences of India’s landmark legislation against child labor, the Child Labor (Prohibition and Regulation) Act of 1986. Using data from employment surveys conducted before and after the ban, and using age restrictions that determined who the ban applied to, we show that child wages decrease and child labor increases after the ban. These results are consistent with a theoretical model building on the seminal work of Basu and Van (1998) and Basu (2005), where families use child labor to reach subsistence constraints and where child wages decrease in response to bans, leading poor families to utilize more child labor. The increase in child labor comes at the expense of reduced school enrollment. We also examine the effects of the ban at the household level. Using linked consumption and expenditure data, we find that along various margins of household expenditure, consumption, calorie intake and asset holdings, households are worse off after the ban.

The paper is here.

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Paul Frijters
Paul Frijters
8 years ago

yes, I recall seeing a bbc report many years back on the consequences of publicly defaming big-name sports brands for using child labour somewhere around Pakistan years earlier, finding many of the kids previously employed in making footballs were turned into prostitutes. A very similar theme to the article you link to and a very courageous report by a reporter openly admitting the bad consequences of her good intentions when she defamed the international companies. For the life of me, I cant remember the reporter’s name and thus find the episode.

Patrick
Patrick
8 years ago

This surely can’t be a surprise?? Did anyone out there still believe in the regulation fairy?

It reminds me of that famous oldie but goodie where we ban drugs to make the world safe for, well, someone somewhere I guess.

steve from brisbane
8 years ago

The problem would appear to not be regulation per se, but piecemeal regulation with poor enforcement.

The libertarian inclined take studies like this to argue that nothing should be attempted to remedy the situation, which is morally indefensible when it is clear (as it would be in some countries) that economic development alone is going to take many decades to lift the poor out of extreme poverty.

derrida derider
derrida derider
8 years ago

What steve said – this paper does not a general case against regulation make. Rather it’s a caution to judge policy by hard evidence and to look out for unintended consequences, not judge it by how much warm inner glow it gives the bien-pensant.

Development economists (and anthropologists and sociologists, too) have for decades been pointing out the upside of child labour among the very poorest (ie it can be a damn sight better than the practically available alternative), so these consequences were not only predictable but very much predicted.

That said, though, I think the paper is a very partial assessment. Only at the subsistence constraint is the income effect (“now her wages have dropped the kid has to work more if she’s to eat”) likely to dominate the substitution effect (“now her wages have dropped its not worth the kid working – send her to school”) to make a backward bending labour supply curve. What may have been true in comparing India in 1986 with India in 1987 may not at all be true of India in 2013; the number of truly deperate families (the ones the ban hurt) is of course still too large but much smaller than twenty years ago, while the number of poor but not desperately so (the ones whose children benefit from a ban) has massively increased. Maybe the law was just a decade or two too early.