Comments Rotten Parents and Child Labor

Baland and Robinson (2000) investigate the conditions under which decisions by parents about their own children’s work are inefficient. Using a simple two-period model with altruistically linked family members, they show that child labor decisions are efficient when credit markets are perfect and intergenerational altruistic transfers are nonzero. Moreover, they show that when the level of child labor is inefficient, because of liquidity constraints or because altruistic transfers are at a corner, a ban on child labor can be Pareto-improving. We argue here that the results of Baland and Robinson are significantly altered when preferences account for the fact that children have a disutility for labor. We find that child labor may be Pareto inefficiently high even if markets are perfect and there are altruistic transfers. This economic inefficiency is not related to market imperfections, but is a consequence of the