Credit constraints and the phenomenon of child labor

This paper develops an overlapping generations general equilibrium model where inefficient child labor arises due to credit constraints. It derives a positive relationship between inequality in the distribution of income and the incidence of child labor. Looking at policy implications, it shows how trade sanctions against countries using child labor may fail to reduce the incidence of child labor. It discusses some alternative policies to reduce the incidence of child labor. (C) 2001 Elsevier Science B.V. All rights reserved. JEL classification: J24; D60.