DP3733 Voting with your Children: A Positive Analysis of Child Labour Laws
We develop a positive theory of the adoption of child-labour regulation, based on two key mechanisms. First, parental decisions on family size interact with their preferences for child-labour regulation. Second, the supply of child labour affects skilled and unskilled wages. If policies are endogenous, multiple steady-states with different child-labour policies can exist. The model is consistent with international evidence on the incidence of child labour. In particular, it predicts a positive correlation between child labour, fertility and inequality across countries of similar income per capita. The model also predicts that the political support for regulation should increase if a rising skill premium induces parents to choose smaller families. A calibration of the model shows that it can replicate features of the history of the UK in the 19th Century, when regulations were introduced after a period of rising wage inequality, and coincided with rapidly declining fertility and rising educational levels.
