Child Labour and Globalisation: How Price Effects Reshape Developing Economies?

Abstract The present paper delves into the intricacies of trade on child labour. Theoretically, developing countries exporting child labour-intensive products can experience increase in child labour employment (termed as substitution effect). However, if trade creates employment opportunities for parents and leads to a more equitable income distribution, child labour incidence may fall due to the income effect. In this context, the present paper investigates the impact of trade liberalisation on child labour. For this purpose, we have identified the net exporter of child labour-intensive goods for a sample of 39 developing countries. Instrumental Variable estimation results indicate substitution effect for the period 2002–2019. The results suggest that trade alone may not be enough to eradicate child labour. Supporting domestic policies like education, health, and more equitable income distributions can have a favourable impact on reducing child labour incidence. Prioritising investments in education, social protection, and inclusive economic opportunities is essential to ensure that the gains from trade liberalisation translate into meaningful and sustained reductions in child labour.