Origins and Consequences of Child Labor Restrictions: A Macroeconomic Perspective

We investigate the positive and normative consequences of child-labor restrictions for economic aggregates and welfare. We argue that even though the laissez-faire outcome may be inefficient, there are usually better policies to cure these inefficiencies than the imposition of a child-labor ban. Given this finding, we investigate the potential political-economic reasons behind the emergence and persistence of child-labor legislation. Our investigation is based on a structural dynamic general equilibrium model that provides a coherent and uniform framework for our analysis. ∗Doepke wishes to thank the Alfred P. Sloan Foundation and the National Science Foundation (grant SES-0519265) for financial support. Doepke: Department of Economics, University of California, Los Angeles, 405 Hilgard Ave, Los Angeles, CA 90095-1477 (e-mail: [email protected]). Krueger: Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19104 (e-mail: [email protected]).