Abstinence from child labor and profit seeking |
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Institution: | 1. London School of Economics, United Kingdom;2. Ofcom, United Kingdom;1. Department of Management, Technology and Economics, ETH Zürich (DMTEC-ETH), Weinbergstrasse 56/58, 8092 Zürich, Switzerland;2. Institute of Technology Management, University of St. Gallen (ITEM-HSG), Dufourstrasse 40a, 9000 St. Gallen, Switzerland |
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Abstract: | Opponents of child labor suggest that demand-driven mechanisms can eliminate such practices. If consumers prefer adult-labor products, they suggest that labeling will drive out child-labor products. I show that under Bertrand competition, even with complete information, this is unlikely. When products are differentiated only by labor type, such a scheme requires at least three firms and child-labor costs at least as large as adult-labor costs. With additional lines of differentiation, child labor is eliminated only when the adult-labor costs are smaller. Thus, while labeling may reduce child labor, it is unlikely to eliminate it. |
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