WHY DOES CHILD LABOR PERSIST WITH DECLINING POVERTY?

We develop a dynamic overlapping generations model to highlight the role of income inequality in explaining the persistence of child labor under declining poverty. Differential investment in two forms of human capital—schooling and health—in the presence of inequality gives rise to a nonconvergent income distribution in the steady state characterized by multiple steady states of relative income with varying levels of education, health, and child labor. The child labor trap thus generated is shown to preserve itself despite rising per capita income. Policy recommendations include public provision of education targeted toward reducing schooling costs for the poor or raising the efficacy of public health infrastructure. (JEL I1, J2, O1, O2)     

TAX EFFECTS VERSUS BUDGET EFFECTS ON LABOR SUPPLY

This paper analyzes the effects on labor supply of parallel changes in taxes and public spending of various types. A number of important recent developments in the labor supply behavior of households are highlighted by such a study of various types of "budget effects," rather than isolated "tax effects." This comes out in particular when considering cross substitution effects on labor supply of changes in public spending on goods and services or of the subsidization of goods and services provided by private markets. Moreover, the income effects of tax changes are often mitigated, or possibly even removed, by the income effects of the accompanying expenditure changes.     

DEMAND FOR NATIONAL PUBLIC GOODS: ESTIMATES FROM SURVEYS

This paper presents an empirical method of estimating aggregate demand functions for national public goods. The technique combines survey responses and tax incidence figures in a probit model. The model provides estimates of average willingness-to-pay for federal government services and simultaneously regresses these estimates on socioeconomic characteristics, thus obtaining estimates of the demand function. The main findings are that demand for defense, space, foreign aid, welfare, education and aid to cities is a concave function of income, a negative function of expenditure level (generally) and dependent upon such characteristics as race, age, education level, and sex.     

Financing of college education by single-parent and two-parent families

The financing of college education by male and female single-parent families and two-parent families is compared. Female single parents are at a significant disadvantage in being able to accumulate funds, but this is partially offset by financial aid. Variables accounting for significant variation in the parents' contribution to student education expenses are: public versus private school, financial aid, parents' saving behavior, students' contribution, race, and family type. The amount of parental contribution is positively correlated with parent net worth, family per capita income, and total student cost; it is negatively correlated with age of the student.This study utilized data from the National Postsecondary Education Student Aid Study prepared for the National Center for Education Statistics, U. S. Department of Education, by Westat, Inc. Partial support for the research was supplied by the College of Human Ecology and the Computer Science Center of the University of Maryland. The author expresses her appreciation to the Editor and Reviewers for their valuable suggestions.Her research interests include personal finance, family resource management, and personal factors affecting the handling of money. She is a graduate of Berea College, Berea, KY, and received both the M. Ed. and Ed. D. from The Pennsylvania State University.     

The Unintended Effects of Private School Competition

We examine whether competition from private schools improvespublic school performance and expenditure. It is difficult methodologicallyto isolate the effect of competition, but we use new measuresof competition in both the public and the private school sectorand a data set comprising detailed background information onmore than 35,000 public school students in the Danish vouchersystem. This design provides a relatively firm support for theconclusion that competition does not improve achievement ofpublic school students but that it increases public expenditureper student. Finally, we argue that there may be several goodreasons for this.     

Trade Liberalization and Child Labor: A Case Study of Pakistan

The boom in industrial sector has lead to many problems and child labor is no exception. This study explores the linkages between trade liberalization and child labor both in short and long-run. The results suggest that GDP per capita and income inequality increase the child labor in the long-run but these results disappear in short-run. The study also finds that income inequality has positive and significant impact on child labor. Our findings also support that trade openness along with trade sanctions (imposed by the developed countries) are associated with the reduction in child labor in Pakistan.     

Private school competition and public school teacher salaries

Teacher unions have fiercely fought public policy measures (e.g., vouchers, tuition tax credits) that might increase the proportion of students attending private schools. Yet increased competition in the educational service market should also lead to greater labor market competition, reducing any quasi-monopsony tendencies depressing teacher salaries. Using detailed data on over 600 Ohio school districts, we find that increased private school competition leads to higher salaries for public school teachers. It may be that union leaders disregard the interests of their members in trying to maximizing union size and power. An alternative interpretation is that unions sacrifice shortrun income gains for their members in order to maintain longterm economic rents associated with substantial political power.     

Racial/Ethnic Patterns of Kindergarten School Enrollment in the United States

Enrollment into unequal schools at the start of formal education is an important mechanism for the reproduction of racial/ethnic educational inequalities. We examine whether there are racial/ethnic differences in school enrollment options at kindergarten, the start of schooling. We use nationally representative data from the Early Childhood Longitudinal Study‐Birth Cohort (ECLS‐B) to model whether parents seek information about their child's school before enrolling, whether parents move to a location so that a child can attend a certain school, or whether parents enroll their child in a school other than the assigned public school. Results indicate that enrollment patterns differ greatly across race/ethnicity. Whereas Black families are the most likely to seek information on a school's performance, White families are the most likely to use the elite option of choosing their residential location to access a particular school. These differences persist when controlling for socioeconomic status and sociogeographic location. Kindergarten enrollment patterns preserve the advantages of White families, perpetuating racial/ethnic disparities through multiple institutions and contributing to intergenerational processes of social stratification. Research should continue to examine specific educational consequences of housing inequities and residential segregation.     

A Model of Parental Demand for Child Labor with High Fertility Norms

This paper sets out a model to examine how social norms regarding fertility influence parental choice between child labor and child's education. The parent is modeled as a social animal who derives utility from conformity with behavior of other members of the society. In deciding on the number of children, parents internalize the gain of utility from conformity to the norm for fertility. The model investigates the influence of the social element of conformity on the education decision for children and the prevalence of child labor. Social utility from conformity with exogenous social norms of high fertility increases the prevalence of child labor. This social norm can decrease the effectiveness of public policy aimed at encouraging education in place of child labor.     

The American Educational Structure and the Reproduction of Social Class*

While considerable attention has been drawn to “reproduction” theories of education, little empirical research has been conducted within this framework. This paper uses the reproduction perspective to examine how various mechanisms of the American educational structure contribute to the maintenance of the mental-manual division of labor within class structure. Using a national, longitudinal sample of high school seniors, we look at the reproduction effects of public versus private schooling, the composition of school communities and curriculum tracking. We find that reproduction results from the schooling experiences of a majority of students and that tracking is the most important mechanism in this process. However, nonreproduction is apparent as well which points to some issues that reproduction theories must address to provide viable explanations of the role of education in society.     

Is family planning an economic decision?

This study examines economic models of household choice and the role of economic factors in determining the timing of births. A static economic model is presented and tested with data from the Netherlands. After the availability of contraceptives, the family size variable shifted from being an exogenous to an endogenous one, because births could be regulated. Costs of childbearing were construed to have maintenance costs for parents and society, attendance costs of care, and intangible costs such as anxiety or personal freedom. Benefits were intangible ones, such as joy and happiness; income; public benefits; and attendance benefits. Intangible benefits enlarged the utility of children, but maintenance costs diminished resources available for consumption. Child quality was a product of market goods purchased by parents and others and household labor. Household time allocation varied with child's age. Private responsibility for children varied by country. Quality of child care varied between countries and over time. Quality was dependent upon economies of scale, variable costs by the age of the child, variable time commitments by age of the child, and market substitutes for private child care. Higher income families spent more money but less time on children. It is pointed out that Becker's model explained number of children, but not timing of births. Postponement of birth was unlikely for those with a limited education, an unpleasant job, and low wages. When the advantages and disadvantages of having a baby were positive, spouses or single women with a high subjective preference were expected to bear a child as soon as possible. Government policy can affect the average family size by increasing or decreasing the financial and/or time burden of children. Postponement may be chosen based on long term analysis of a couple's future, the formation and use of capital, and/or high subjective time preference. Before and after first birth are different frames of reference for couples. Before the birth, the future may be vague. After the birth, life without a child becomes unimaginable.     

How does inequality aversion affect inequality and redistribution?

We investigate the effects of inequality aversion on equilibrium labor supply, tax revenue, income inequality, and median voter outcomes in a society where agents have heterogeneous skill levels. These outcomes are compared to those which result from the behavior of selfish agents. A variant of Fehr-Schmidt preferences is employed that allows the externality from agents who are “ahead” to differ in magnitude from the externality from those who are “behind” in the income distribution. We find first, that inequality-averse preferences yield distributional outcomes that are analogous to tax-transfer schemes with selfish agents, and may either increase or decrease average consumption. Second, in a society of inequality-averse agents, a linear income tax can be welfare-enhancing. Third, inequality-averse preferences can lead to less redistribution at any given tax, with low-wage agents receiving smaller net subsidies and/or high-wage individuals paying less in net taxes. Finally, an inequality-averse median voter may prefer higher redistribution even if it means less utility from own consumption and leisure.     

Children’s Time Use: Labor Divisions and Schooling in Indonesia

Data from the Worker and Iron Status Evaluation are used to examine gendered patterns in children’s time in market and nonmarket work, schooling, and leisure in Indonesia (N= 2,929). Boys spend more time in market work; girls spend more time in nonmarket work. Work responsibilities increase with age as well as gender differentials in children’s time use. By age 18, girls spend nearly 1 more hour per day working and enjoy significantly less leisure time, but the gender gap in schooling is not significant, suggesting that parents and children are committed to both work and schooling. Additionally, Tobit regression results suggest that parents’ education, household income, and rural residency are important predictors of children’s labor and schooling time.     

Immigration,labor force integration and the pursuit of self-employment

A correspondence analysis was used to examine the entire working life cycle of Canadian-born male age-education cohorts and immigrant male age-education cohorts who arrived during 1945-61. Data were drawn from the 1961 and 1971 census databases as well as the 1981 and 1991 public individual files. Findings support the existence of a split labor market based on immigrant status, particularly at the low end of the schooling spectrum. In 1961, immigrants with low levels of schooling were closely associated with the wage construction sector, whereas Canadian-born males below the high school level would most likely gravitate towards consumer services. Meanwhile, immigrants with a high school education were likely to be in consumer services; whereas, Canadian-born males with a high school education were closely aligned with public administration and distributive services. Moreover, immigrants with higher levels of schooling were less likely to work in ethnically dominated markets, while immigrants with low schooling moved into the self-employed construction sector. The existence of a split in the labor market was evident among workers with lower levels of schooling compared with university-educated workers.     

Citizenship and power in an agent-based model of tax compliance with public expenditure

In this paper we present a model of tax compliance with heterogeneous agents who maximize their individual utility based on income and the conjectured level of per capita public expenditure. We formally include psychological drivers in this model. These drivers affect individual behavior, such as risk aversion, together with appreciation of public expenditure, expectations about peers’ compliance and a natural inclination to comply, all of which we summarize in a quality termed “citizenship”. The enforcement system, based on random inspections, is standard and only partially known to agents.The agent-based model is simulated under a variety of settings, representing different “societies”. We use the artificial data produced by the model to estimate the effects of taxpayers’ traits on personal tax behavior and to build a compliance societal slippery slope. At the individual level, we find a positive dependence of compliance on all variables, with the significant exception of the tax rate, which has a negative impact. As far as societies are concerned, we show how aggregate tax compliance depends on composite indices of citizenship and power, and we find that the former is more important than the latter.     

The schooling repayment hypothesis for private transfers: evidence from the PROGRESA/Oportunidades experiment

The schooling repayment hypothesis for private transfers predicts a positive relationship between the amount of parental investment in children’s education and the amount that adult children transfer to their parents. We provide evidence on the repayment motive using data from the Mexican conditional cash transfer program PROGRESA/Oportunidades (PO). PO pays a transfer to parents for sending their children to school. Thus, if private transfers from adult children to parents are in part repayment for parental schooling investments made in the past, then PO should decrease these transfers—parents were already exogenously compensated by the government for sending their kids to school and not to work. Exploiting the exogenous variation in the amount of cash transfers a household receives from PO for sending its children to school, we compare the private transfers received in 2007 by parental households who had children 0–16 in 1997 and started receiving the programs’ benefits in 1998 with the transfers received by similar parental households who started receiving benefits in 1999. Results suggest a repayment motive exists. That is, PO is causing adult children to transfer less resources to their parents.     

VOTING FOR INCOME‐IMMISERIZING REDISTRIBUTION IN THE MELTZER–RICHARD MODEL

This paper argues that income received via redistributive transfers, unlike labor income, requires no direct sacrifice of leisure; this makes it attractive to many voters even if it leaves them poorer. This point is made within the classic Meltzer and Richard (1981) model wherein heterogeneous voters evaluate an income‐redistribution program that finances a lump‐sum transfer to all via a distorting income tax. The political‐equilibrium policy under majority rule is the tax most preferred, utility‐wise, by the median voter. Ironically, this voter, and many poorer voters, may support a redistribution policy that leaves them poorer in income terms but with higher utility. (JEL H2, E6, D72)     

Psychological taxing in Flemish municipalities

We analyse whether the psychological pricing in the private sector has a public sector counterpart in tax policy. Analysing the main theoretical arguments for the existence of price points, and applying them to the public sector, suggests that psychological taxing reveals itself by the use of non-0 ending tax rates. The tax rate endings of the local income taxes, which are set by 308 Flemish municipalities in the fiscal year 1998, suggests the presence of psychological taxing. Non-0 endings occur more frequently in municipalities where demand for public policy is more elastic (and where, therefore, the benefits to the politicians from setting a tax just below a tax point is higher). The pre-tax income inequality and the level of the tax rate positively affect psychological taxing. The latter effect is reinforced in those municipalities where the existing tax rate is above the average tax rate in neighbouring municipalities and below their neighbours’ minimum, although this effect has a limited effect and is offset the further below the minimum the tax is set.     

WELFARE IMPACT OF A BAN ON CHILD LABOR

This article presents a new rationale for imposing restrictions on child labor. In a standard overlapping generation model where parental altruism results in transfers that children allocate to consumption and education, the Nash‐Cournot equilibrium results in suboptimal levels of parental transfers and does not maximize the average level of utility of currently living agents. A ban on child labor decreases children's income and generates an increase in parental transfers bringing their levels closer to the optimum, raising children's welfare as well as average welfare in the short run and in the long run. Moreover, the inability to work allows children to allocate more time to education, and it leads to an increase in human capital. Besides, to increase transfers, parents decrease savings and hence physical capital accumulation. When prices are flexible, these effects diminish the positive welfare impact of the ban on child labor. (JEL D91, E21)     

THE LONG‐TERM EFFECTS OF CONDITIONAL CASH TRANSFERS ON CHILD LABOR AND SCHOOL ENROLLMENT

This paper investigates the long‐term effects of conditional cash transfers on school attainment and child labor. To this end, we construct a dynamic heterogeneous agent model, calibrate it with Brazilian data, and introduce a policy similar to the Brazilian Bolsa Família. Our results suggest that this type of policy has a very strong impact on educational outcomes, sharply increasing primary school completion. The conditional transfer is also able to reduce the share of working children from 22% to 17%. We then compute the transition to the new steady state and show that the program actually increases child labor over the short run, because the transfer is not enough to completely cover the schooling costs, so children have to work to be able to comply with the program's schooling eligibility requirement. We also evaluate the impacts on poverty, inequality, and welfare. (JEL O11, I25, J24)